Instead of Toys, Children's Fund... Should We Try Long-Term Investment?

Expectations for Mid- to Long-Term Normalization of the Stock Market
23 Funds with Over 1 Billion KRW in Assets Under Management
Total Net Inflow of 800 Million KRW in the Past Month

[Asia Economy Reporter Oh Ju-yeon] Since the volatility of the stock market increased due to the novel coronavirus infection (COVID-19), the atmosphere of opening stock accounts for children has spread, bringing children's funds back into the spotlight. It is true that they were neglected for a while because the returns were not high in the so-called 'Boxpi' (KOSPI moving within a box range) market, but as the stock market plunged due to COVID-19, it is interpreted that investors are approaching with the expectation of 'market normalization' from a mid- to long-term perspective.

According to financial information company FnGuide on the 8th, a total of 800 million KRW was net inflowed into 23 children's funds with assets under management of over 1 billion KRW as of the 7th in the past month. This is unusual considering that the assets under management in children's funds had been steadily decreasing until now.

Domestic children's funds saw a total decrease of 6 billion KRW over the past three months and an outflow of 24.3 billion KRW over six months. This is because long-term investors withdrew funds as the returns did not meet expectations even after holding for a long time. The assets under management decreased by 227.3 billion KRW over the past three years, and if extended to five years, there was a net outflow of 595.9 billion KRW.

The 5-year average return of domestic children's funds was -6.24%, and the 3-year average was -9.69%. The 2-year average was even lower at -17.73%. During the same period, gold funds recorded 29.23% (5 years), 28.03% (3 years), and 29.25% (2 years), respectively. An investor who subscribed to a children's fund mainly composed of domestic blue-chip stocks such as Samsung said, "I approached it as a long-term investment, but the return has been negative for nine years."

After the stock price plunged due to COVID-19, the recent stabilization of the stock market has led to a favorable performance of children's funds, which had been evaluated as unsatisfactory. The return over the past month was 7.38%, surpassing the one-month average return of 5.79% for domestic stock exchange-traded funds (ETFs).

However, since children's funds approached as long-term investments can have significantly different returns depending on the composition and weight of stocks in each product, it is necessary to carefully examine these and devise a strategy when subscribing. For example, the children's fund with the highest returns over the past 3 and 5 years is Mirae Asset Management's 'Woori Ai Chindia Sector Leader' fund, which has a large proportion of overseas stocks such as China. While the average loss rate of children's funds over 3 and 5 years reached 6-9%, this fund posted returns of 12-14%. It is characterized by investments in Chinese mobile company Tencent and e-commerce company Alibaba. On the other hand, the 'Daeshin Representative Company Children's Savings' fund, which has a high proportion of domestic companies, recorded a 5-year return of -34% and a 3-year return of -21%. Its 1-month return reached 8%, exceeding the average.

An investor said, "I have two children's funds that I subscribed to about 10 years ago; one had a return of 60%, and the other went down to -30% but is now around -5%," adding, "From my experience, it was better to subscribe by dividing the investment rather than putting all into one children's fund."

This content was produced with the assistance of AI translation services.