Korean retail investors love leveraged exchange-traded funds (ETFs), so much so that their holdings in some well-known U.S.-listed leveraged ETFs have reached more than 20%. Data shows that one of their favorite ETFs has amplified its bet on Tesla by 1.5 times, and the other has tripled its bets on technology stocks such as FAANG - they hold no less than 35% and 28% of the shares of these two ETFs respectively.

The third most popular is a triple-leveraged ETF tracking U.S.-listed chip stocks (trading symbol SOXL), which has soared nearly 140% this year.

"There are too many people buying SOXL in Korea, and some people don't even know it is triple leverage," Park Eun-hye said. The 35-year-old works at a semiconductor company in Hwaesong, a city near Seoul. She said it's hard to find people locally who don't buy ETFs.


Data show that Korean retail investors have invested US$2.3 billion in U.S.-listed large-scale leveraged ETFs and inverse ETFs this year, almost three times the investment in similar funds in 2022. Their willingness to take such volatile positions boils down to inadequate pension schemes, high costs of living and a general preference for riskier investments.

The use of derivatives, which often magnify gains and losses by two to three times, provides investors with the opportunity to make big gains with small gains. Inverse ETFs rise when the underlying index or security falls, and vice versa.

"Simple and ordinary is boring. They want two to three times leverage - at least in some sectors," said Rebecca Sin, an equity strategist at Bloomberg Intelligence in Hong Kong. She said ETFs have soared in popularity in South Korea, thanks to their broad product range and social media, where many influencers promote the virtues of investing in such products.

"30% of Korean investors' total overseas ETF investments have gone to leveraged products, and they are very important to some single stock leveraged ETFs," Sin said.


Korean retail investors are known to be risk-takers. Just a few years ago, the country was the center of the global cryptocurrency craze, with Bitcoin enjoying a “kimchi premium” in South Korea—more than 20% higher than mainstream international prices. They are also interested in leveraged financial products such as structured notes.

Lim Dong Seob, a father of two, said he started buying leveraged ETFs because he hoped to invest small amounts of money to get high returns, with the ultimate goal of spending more time with his family.

"Ordinary ETFs are also good investment products. But leveraged ETFs seem to be more suitable for me because my principal is very small," he said. "I'm still young, my kids are young, so it seems like a prime time to invest, and that's why I can continue to be aggressive."

Lim said that 80% of his current stock investments are in SOXL. The official name of SOXL is DirexionDailySemiconductorsBull3xShares.

“In South Korea, where class mobility is very low, investing in U.S. leveraged ETFs could be a way to climb the social ladder,” he said.