Investments via brokerage-type ISAs grow rapidly, led by young investors

2023.09.19 15:08:01 | 2023.09.19 15:31:15

[Image source: Gettyimagesbank]이미지 확대

[Image source: Gettyimagesbank]



The use of Individual Savings Accounts (ISAs), which allows subscribers to invest in various assets while enjoying tax benefits, has been steadily increasing in South Korea. Among these accounts, the growth of brokerage-type ISAs, allowing for direct investment in stocks and exchange-traded funds (ETFs), has been particularly robust.

As of the end of July, the total investment from all types of these accounts was 21.76 trillion won ($16.5 billion), with the number of account holders increasing to 4.79 million. The growth of brokerage-type ISAs is remarkable, with the total investment amount increasing by 28 percent from 6.48 trillion won at the end of last year to 8.29 trillion won as of the end of July this year. In contrast, trust-type ISA investments grew by only 12 percent, while discretionary-type ISA investments declined during the same period.

ISAs are often referred to as “all-purpose accounts” because they offer tax benefits while allowing individuals to invest in a wide range of financial assets, including savings accounts, domestic stocks, funds, real estate investment trusts (REITs), and equity-linked securities (ELS). At maturity, the taxable income and losses are calculated cumulatively, with net profits up to 2 million won eligible for tax exemption.

Brokerage-type ISAs have gained popularity among young Korean investors seeking asset growth. Among the 3.71 million brokerage-type ISA subscribers at the end of July, those in their 20s and 30s accounted for 43 percent. Investments in stocks and ETFs through brokerage-type ISAs totaled about 5.62 trillion won, accounting for nearly 70 percent of the total investment amount as of July.

Samsung Securities, the brokerage firm with the largest number of ISA subscribers, had 970,288 subscribers to its brokerage-type ISAs as of September 13, and is close to hitting the one-million milestone. The total investment amount from its ISAs also recently exceeded 1.8 trillion won.

Trust-type and discretionary-type ISAs were introduced in 2016 but mainly focused on savings products, leading to concerns about low returns. Individuals have been able to open brokerage-type ISAs since February 2021, allowing them to directly manage their investments. By the end of that year, the number of subscribers had surged to 2.33 million, outperforming trust-type (840,000) and discretionary-type (250,000) ISAs less than a year after their launch.

By Kim Jung-beom and Minu Kim

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