If You’re Worried About Market Swings: "Steady Cash Flow Even Amid Volatility" - Experts Recommend These ETFs

VKOSPI Surges Above 70 for Three Consecutive Days
Strong Buying in Covered Call ETFs as Investors Seek Cash Flow
Bond-Mixed ETFs Pursue Both Growth and Stability
Advice: "Invest Long-Term in Megatrends Amid Volatility"

With the market repeatedly fluctuating, more investors are contemplating whether to "jump in now" or "pull out now." Experts have recommended dividend and bond-mixed Exchange-Traded Funds (ETFs) as suitable investment products in this volatile environment. They also explained that this is a good opportunity to take advantage of volatility and continue long-term investments in solid "megatrend" sectors such as semiconductors.

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According to the Korea Exchange on May 15, the KOSPI 200 Volatility Index (VKOSPI) closed at 70.14 on May 12, 76.16 on May 13, and 72.52 on May 14, all above 70. Notably, on May 13, it reached the highest level since March 4 of this year (80.37), which was right after the Iran war. The KOSPI 200 Volatility Index reflects the expected volatility of the KOSPI 200 over the next 30 days and is referred to as the "Korean Fear Index." When the index is high, it means investors are viewing the future with anxiety and believe there is a high likelihood of sharp fluctuations in stock prices.

In this environment, investors have been actively purchasing covered call ETFs with high dividend yields. According to ETFCheck, as of the previous day, individuals had a net purchase of 345.3 billion won in the "KODEX 200 Target Weekly Covered Call" ETF over the past week. This amount ranks second among all ETFs. Individual net purchases also included 154.4 billion won (8th place) in the "KODEX Semiconductor Target Weekly Covered Call" ETF and 143.9 billion won (10th place) in the "TIGER Semiconductor TOP10 Covered Call Active" ETF.

Covered call ETFs are products that provide distributions by adding call option writing premiums to stock dividends. While some excess gains in rising markets must be given up, the advantage is that they can generate cash flow through distributions even in volatile conditions. Lim Eunhye, a researcher at Samsung Securities, stated, "It is estimated that the average monthly distribution from all covered call ETFs amounted to 150 billion won from January to April this year," adding, "The effectiveness of cash flow strategies utilizing the distributions from covered call ETFs has increased."

Industry experts have also suggested "bond-mixed ETFs," which pursue both growth and stability, as investment options amid volatility. Recently, many bond-mixed ETFs combining stocks and bonds in a 50:50 ratio have been launched. For example, the "RISE Samsung Electronics SK hynix Bond-Mixed 50" ETF surpassed 2 trillion won in net assets just 51 trading days after its launch in February. Yuk Donghui, head of ETF Product Marketing at KB Asset Management, explained, "This product invests in Samsung Electronics and SK hynix, which are currently expected to show the strongest profit growth among bond-mixed ETFs, but does so alongside bonds, making it possible to expect returns while also hedging against volatility, so I recommend it."

Advice has also emerged that the greater the market volatility, the more investors should "invest long-term" in robust megatrend sectors. Kim Seungcheol, head of ETF Investments at NH-Amundi Asset Management, said, "Megatrend sectors that have driven long-term growth have ultimately delivered high performance even amid short-term market swings," and added, "I recommend a strategy of responding to market volatility not as a crisis but as an opportunity, by accumulating high-quality assets through systematic, phased purchases." He identified artificial intelligence (AI) and semiconductors as examples of megatrend sectors.

Nam Yongsoo, head of the ETF Division at Korea Investment Management, also advised, "Even as market volatility increases, what deserves attention is that global big tech companies' data center investment plans are continuing regardless of external variables," adding, "The greater the volatility, the more important it is to focus on assets with strong fundamentals."

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