Korean Investors Misunderstand High-Risk Leveraged ETFs, Education Urged
A Korean financial watchdog foundation has released survey results showing that while many adults invest in funds or ETFs, a substantial share of high-risk leveraged and inverse ETFs are taken on by investors who do not fully understand their risk structures. About six in ten respondents who invested in high-risk ETFs reported profits, compared with about eight in ten who invested in ordinary ETFs. The survey also found that roughly half of high-risk ETF investors could not precisely explain how profits and losses are generated with these products.
The Korea Financial Consumer Protection Foundation announced the findings on December 12, based on online surveys conducted in November and December last year. The sample consisted of 2,500 adults aged 25 to 64, offering insight into how ordinary Koreans understand and engage with investment products.
The data show a shift from traditional funds to ETFs: ETF ownership stood at 30.7%, higher than the 26.3% share for funds. Investors cited convenience—likening ETF trading to stock trading (23.3%)—and the pursuit of stable returns (23.2%) as the main reasons for choosing ETFs.
Among ETF investors, 42.1% had experience with high-risk ETFs such as those using leverage or inverse exposure. Age patterns were notable: 20-somethings showed particularly high exposure, with 52.7% reporting experience with high-risk ETFs, suggesting a more aggressive risk posture among younger adults.
The average amount invested in high-risk ETFs was 17.77 million won. A majority of high-risk ETF investors, 61.5%, put in less than 10 million won. By gender, men invested more on average (about 22.13 million won) than women (about 9.95 million won).
On profitability, 58.8% of respondents reported profits from high-risk ETFs, versus 79.9% who profited from ordinary ETFs. In terms of returns, high-risk ETFs averaged 42.5% gains, compared with 25.8% for ordinary ETFs.
Knowledge of these products matters: when asked to test their understanding, respondents scored an average of 53.8% correct. The question with the lowest correct rate asked whether a 2x leveraged ETF would deliver twice the daily return of its benchmark over the long term; only 38.6% answered correctly. The foundation noted that while prior education warns investors about risk, many do not grasp the actual structure of leveraged products, implying that practical learning has not kept pace with product complexity.
For U.S. readers, the findings carry relevance beyond Korea. The United States hosts a large market for ETFs, including leveraged and inverse products that use daily rebalancing and can diverge from long-term index performance. The Korean results highlight persistent gaps between perceived risk and actual risk among retail investors and underscore the ongoing need for clear disclosures, investor education, and suitability guidance for complex products in the United States as well. As cross-border financial products and global asset managers expand their reach, these lessons from Korea may inform how regulators and educators approach risk literacy for retail investors in the U.S. market.