The Investment Portfolios of Korea's Wealthy

We'd like to introduce a great article about Korea's wealthy from Hankyung Business, a magazine recently published by The Korea Economic Daily.
Korea's wealthy are actively moving away from traditional real estate-centered investment toward portfolio diversification. According to the '2024 Korean Wealth Report' released by KB Financial Group, Korea's wealthy, who hold financial assets of 1 billion won or more, increased their assets by 79 trillion won over the past year, expanding their total financial assets to 2,826 trillion won.

[Asset status of Korea's wealthy]
- Total financial assets: 2,826 trillion won (+79 trillion won year-on-year)
- Asset composition
* Real estate: 55.4% (0.8%p ↓ year-on-year)
* Financial assets: 38.9% (1.0%p ↑ year-on-year)

Particularly noteworthy is the decline in the share of real estate assets. Real estate accounted for 55.4% of total assets, down 0.8 percentage points from the previous year. In contrast, the share of financial assets rose 1.0 percentage point to 38.9%. This is analyzed as the combined result of falling real estate prices due to rising interest rates and the diversification of financial investment options.

[Investment preference ranking]
- Real estate: 40% (1st)
- Physical assets (gold/jewelry/art): 34.0% (2nd)
- Domestic financial investment: 30.3% (3rd)

According to an analysis by the Hana Institute of Finance, the biggest change in the investment portfolios of Korea's wealthy is the growing share of bonds and foreign currency assets. In particular, more than 50% of those holding financial assets of 3 billion won or more were found to hold bonds. This appears to be aimed at tax savings through low-coupon bonds. With bond investment, income tax is imposed on interest income, but capital gains are tax-free and are also excluded from comprehensive income taxation, which is an advantage.

[Foreign currency asset holdings]
- Share holding foreign currency assets: 67%
(64% in 2022 → 67% in 2023)
- Foreign currency asset holding rate among those with 10 billion won or more: 90%
- Average foreign currency asset size: 370 million won
- Preference ranking: foreign currency deposits > foreign cash > overseas stocks

In terms of investment interest, real estate still ranked first (40%), but physical asset investment (34.0%) and domestic financial investment (30.3%) followed by a narrow margin.
Particularly noteworthy is the expectation for stock investment.
Intention to invest in domestic stocks was 52.3%, well ahead of overseas stocks (34.8%), and expected returns were also higher than other investment options, at 16.9% and 16.0% respectively.

[Stock investment preference]
- Domestic stocks: 52.3% (expected return 16.9%)
- Overseas stocks: 34.8% (expected return 16.0%)

An expert at the Korea Financial Investment Association analyzed that the investment patterns of Korea's wealthy are gradually shifting toward those of advanced countries., adding, "Especially among younger wealthy people, more are moving away from traditional real estate-centered investment and building portfolios that take global asset allocation and risk management into account."

These changes appear to be the combined result of increased volatility in global financial markets, the end of the low interest rate era, and uncertainty in the real estate market.
The trend of portfolio diversification among Korea's wealthy is expected to continue going forward.

[Investment habits office workers should learn from the wealthy]
Now that we've analyzed the investment habits of the wealthy, we should learn and follow them, right?
What stands out in the investment patterns of the wealthy is diversification and risk management.
In particular, steadily increasing the share of foreign currency assets and including stable investment products such as bonds in the portfolio is something ordinary office workers can also refer to.
Rather than overextending on real estate investment, it is advisable to adjust the share of financial assets appropriately and aim for long-term asset growth through regular investment.