"Invest 100 Million Won and Receive 1.5 Million Won Monthly?"... Warning Issued Over Exaggerated ETF Advertisements

As some advertisements for exchange-traded funds (ETFs) have been found to lack sufficient explanation from the perspective of investor protection, the Financial Supervisory Service has urged investors to check five key points, including investment risks and total expense ratios.

Such advertisements have emerged as the ETF market has grown rapidly. The net asset value of domestic ETFs surged from 74 trillion won in 2021, to 78.5 trillion won in 2022, 121.1 trillion won in 2023, 173.2 trillion won in 2024, and 297.2 trillion won last year.

First, investors should be cautious about advertisements that emphasize stable interest payments as if ETFs were like bank deposits. Unlike bank deposits, ETFs are not protected under the Depositor Protection Act, and investors can incur principal losses at any time. In fact, advertisements have included phrases such as "Maturity bond ETF with high returns as safe as a deposit" and "If you invest 100 million won, you will receive 1.5 million won every month like clockwork."

It is also essential to check the main risk factors inherent to the product. For example, products that emphasize foreign exchange gains can also result in foreign exchange losses; additionally, there is no superiority between spot and futures ETFs, as their structures differ and each product has its own characteristics that must be understood. For instance, some advertisements promote overseas equity ETFs as if they always generate profits regardless of exchange rate trends by highlighting "the advantage of dollar exposure," or they stress that "spot investments are more efficient than futures" by highlighting only the benefits of spot ETFs under specific market conditions, such as higher returns without rollover costs.

It is important to remember that the returns on ETFs shown in advertisements are only for specific periods. When looking at the target returns presented in advertisements, investors must pay attention to the period over which the return is measured. In the case of covered call ETF advertisements, there are frequent cases of exaggerated claims based only on periods when income was temporarily high, such as "the daily option premium (selling price) is several times higher than the monthly option premium."

Investors should not be misled by claims like "first," "overwhelming number one," or "lowest volatility." If such expressions appear, it is necessary to verify their accuracy with comparative data such as disclosures from the Korea Financial Investment Association. In fact, there have been cases where a thematic ETF tracking a specific industry index was advertised as "the only representative ETF for a certain industry in Korea," even though the same type of industry ETF was already listed.

It is also necessary to check not only the management fee shown in the advertisement but also the actual amount of fees. Since management fees and expenses in advertisements are different, investors should verify the total cost they will actually pay. Many advertisements focus only on management fees and fail to provide adequate information about the actual investment cost. There have been cases where advertisements claimed "the lowest management fee in Korea," but in reality, only the management fee was low and the total expense ratio (TER), including other costs, was higher.

An official from the Financial Supervisory Service stated, "We will continue to monitor ETF advertisements for any inappropriate cases to prevent investor confusion, and we will encourage financial companies to make voluntary corrections."

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