Mirae Asset Global Investments has presented an ETF investment strategy that allows investors to receive dividend payouts every two weeks by combining the S&P 500 and NASDAQ 100 indexes.
Lee Jung-hwan, head of Mirae Asset's Strategic ETF Management Division, spoke at a webinar hosted on the company's YouTube channel "TIGER ETF" at 10 a.m. Wednesday. "The biggest enemy of long-term investing is not a market downturn itself, but the anxiety that keeps investors from enduring it," he said. "The most realistic way to keep investing during volatile markets is not to try to predict the market, but to pursue steady cash flow regardless of how the market moves."
Lee also noted that the recent rush of capital into monthly-dividend ETFs reflects growing investor demand for stable cash flow.
In practice, covered-call ETFs have been attracting large sums of money. According to Koscom, the TIGER Dividend Covered Call Active ETF took in 1.2 trillion won ($895 million) over the past three months. The TIGER US NASDAQ 100 Target Daily Covered Call and TIGER US Dividend Dow Jones ETFs drew 924.5 billion won and 665.8 billion won, respectively.
With the domestic stock market lacking clear direction, covered-call ETFs have emerged as an investment alternative. They allow investors to partly participate in share price gains while also generating cash flow.
The covered-call ETF market is also expanding. According to the Korea Exchange, the combined net asset value of covered-call ETFs listed in Korea stood at 15.11 trillion won at the start of the year. It grew to 27.57 trillion won as of Aug. 26. That marks an increase of more than 12 trillion won in less than eight months.
A covered call involves holding shares while simultaneously selling call options on those shares as the underlying asset. It seeks gains from share price increases while using the premiums earned from selling call options as a source of distributions.
In a rising market, however, returns can be limited. Because call options are sold, investors may not fully benefit from gains in the underlying asset if the market rises sharply.
Mirae Asset Global Investments introduced a biweekly-distribution investment strategy using ETFs tracking major US indexes at the webinar that day.
"By combining the TIGER US S&P500 Target Daily Covered Call and TIGER US NASDAQ 100 Target Daily Covered Call ETFs, investors can build a portfolio that invests in major US indexes while receiving distributions every two weeks," Lee said.
The TIGER US S&P500 Target Daily Covered Call ETF changed its distribution record date this month, moving it from the last day of each month to the 15th. Investors who purchase the ETF up to two business days before the record date can receive the monthly distribution.
As a result, investing in it alongside the TIGER US NASDAQ 100 Target Daily Covered Call ETF, which distributes at the end of each month, allows investors to receive payouts every two weeks.
Lee emphasized that both ETFs are designed to participate in gains in their underlying indexes. Typical covered-call products sell 100 percent of their options, limiting upside when the market rises. Target daily covered-call products, by contrast, lower the daily options-selling ratio to about 10 percent, aiming to capture more than 90 percent of the underlying index's gains.
According to Mirae Asset Global Investments, the TIGER US S&P500 Target Daily Covered Call ETF has tracked about 94 percent of its underlying index's performance since its listing. The TIGER US NASDAQ 100 Target Daily Covered Call ETF has tracked about 91 percent.
"Investors can expect biweekly cash flow by diversifying across the S&P 500 and NASDAQ 100, and reinvesting the distributions can also serve as a long-term strategy to increase holdings during market downturns," Lee said.
moon@heraldcorp.com
