How to Invest Your Savings: Asset Allocation for Beginners ========================================================== Divide your savings based on when you will use them, then decide how much to invest. This explains the differences between deposits, interest-rate ETFs, and TDFs, gives asset allocation examples, and examines the calculation that ₩700 million can provide ₩3 million per month after tax. - Set aside living expenses and planned expenses separately, and assess your loan repayment burden. - Decide how much to invest based on when you will need the money and how much loss you can tolerate. - Compare the risks and withdrawal terms of deposits, interest-rate ETFs, and TDFs. - Set target allocations for assets such as stocks and bonds, then start by investing an amount you can afford. - Check after-tax returns and your actual asset allocation, and rebalance if necessary. When putting your savings to work, first set aside living expenses and planned expenditures. Divide the remaining money based on when you will use it and how much loss you can bear. Interest rate ETFs and TDFs can also lose principal, so decide the purpose of the money before choosing a product. The allocation ratios and annual return of 6% are assumptions used for calculations, and the tax information also refers to the National Tax Service's guidance dated March 9, 2026. The Order for Putting Your Savings to Work Before choosing products, decide how much you can invest. Asset allocation means dividing money among different assets such as stocks and bonds. Your investment period and ability to bear losses should determine the allocation. Separate the money needed for daily life. First secure money for living expenses and emergencies. Write down when you will use the money. Separate planned expenditures such as tuition, deposits, and home purchase costs. Compare products and accounts. Check the possibility of losing principal and the conditions for withdrawing money. Set target weights and invest. Start with an amount that will not disrupt your daily life. Review the planned and actual weights. Adjust the investment plan if the purpose of the money changes. If you have loans, first check the interest rate applied to them. Compare the interest saved by repayment with the expected after-tax return from investing. If there is an early repayment fee, include it in the repayment cost. Conditions Based on the Purpose of the Money Even for the same lump sum, the appropriate management method varies depending on when the money will be used. If the investment period is short, it is difficult to allow enough time to recover from losses. Make decisions based on your actual spending schedule rather than your age. Current situation What to decide first Management approach A university student with tight living expenses Money left over each month and tuition payment dates First consider managing expenses and securing emergency funds Someone with a lump sum who is about to begin military service Expenses during service and money needed after discharge Check maturity dates and ease of withdrawal based on when the money will be needed An employee who saves every month Amount that can consistently be set aside from salary Consider regular investing only for long-term funds Someone saving for a deposit or home purchase Schedule for paying the down payment and balance Prioritize preserving principal and withdrawal timing over price movements Someone preparing retirement funds Expected retirement date and possibility of interim withdrawals Consider pension accounts and long-term asset allocation Set the size of your emergency fund based on essential expenses and income stability. It should cover necessary expenses even if your income stops temporarily. You can learn about the relationship between the investment period and risk tolerance in Investor.gov's asset allocation guide. Comparing Deposits, Interest Rate ETFs, and TDFs Consider deposits for holding money under contractual terms, and funds according to your investment purpose. An ETF is a fund traded on an exchange like a stock. A TDF is a fund that adjusts its asset allocation based on a target date. Option Main purpose to consider Nature of principal and returns Conditions to check Time deposit Managing the maturity of an existing lump sum Contracted interest rate applies, and eligible products are protected within the statutory limit Maturity, early termination rate, protection status Installment savings account Regularly saving future income Interest calculated according to how long each payment remains deposited Payment method, preferential interest rate conditions Demand deposit Holding living expenses and emergency funds Interest rate may change, and protection status must be checked for each product Interest rate tiers, transfer conditions Interest rate ETF Investment reserve funds seeking short-term interest returns Performance-based product with possible loss of principal Tracked benchmark, costs, trading price, settlement date Equity ETF Growth funds to be managed over the long term Gains or losses from stock price movements Investment country, industry, holdings TDF Long-term funds with a target date, such as retirement Automatic asset allocation adjustments with possible loss of principal Target year, stock allocation, total costs Deposits and installment savings accounts should not be compared based only on their stated interest rates. Each installment savings payment remains deposited for a different period. Even at the same interest rate, the interest differs from a time deposit in which the entire lump sum is deposited from the beginning. The protection limit for eligible deposits was raised on September 1, 2025. At the same financial institution, the principal and stipulated interest are combined for each depositor. The limit for ordinary deposits is KRW 100 million. All principal and stipulated interest on deposits and installment savings accounts held at one financial institution are protected up to a total of KRW 100 million. This wording comes from the Financial Services Commission's “Everything You Want to Know: Deposits Protected up to KRW 100 Million Starting September 1.” Performance-based products such as funds are not covered by this protection. Check the scope of protection in the Financial Services Commission's guidance dated July 23, 2025. Conditions to Check When Choosing an Interest Rate ETF Interest rate ETFs do not guarantee principal like deposits. They are managed in connection with short-term interest rate benchmarks such as CD rates or KOFR. When interest rates change, the pace at which future returns accumulate may also change. CD stands for certificate of deposit. KOFR is a benchmark interest rate calculated from short-term funding transactions in Korea. Even if a product name includes the term risk-free reference rate, that does not mean the ETF itself is risk-free. Tracked benchmark: Check which interest rate the product uses as its benchmark. Actual costs: Check trading fees as well as management fees. Trading price: Check the bid-ask spread and the difference from net asset value. Synthetic structure: Check the risk that a derivatives counterparty may fail to meet its obligations. Cash availability: Also check the date when proceeds from a sale can be withdrawn. Synthetic products use derivatives contracts to replicate benchmark returns. The resulting risks are stated in each product's prospectus. For example, the HANARO KOFR금리액티브 prospectus explicitly states the risks of over-the-counter derivatives. Criteria for Using TDFs in Pension Savings Accounts and IRPs Long-term investors who want to reduce the work involved in managing asset allocation may consider TDFs. They generally reduce their stock allocation as the target date approaches. Even with the same target year, risk levels vary by product. Pension savings accounts and IRPs are accounts that hold money. A TDF is an investment product that can be selected within those accounts. Depositing money into an account does not automatically complete the purchase of a TDF. Item to check What to check Target year Whether it matches the actual retirement date or time when the money will be used Current asset allocation Whether the current stock allocation is bearable Allocation adjustment path How risk changes before and after the target date Costs How the costs of the TDF and its underlying funds are reflected Existing investments Whether stock and country allocations overlap with other accounts Account conditions Which products can be purchased and what the interim withdrawal conditions are A TDF does not guarantee principal or living expenses at the target date. Automatic adjustments cannot reflect an individual's spending circumstances. Differences among products are also explained in Investor.gov's 2025 TDF guide. Before putting money into a pension account, consider whether you may need to withdraw it early. Some interim withdrawals from an IRP are restricted to legally prescribed reasons. Check with the financial institution offering the account about taxes resulting from withdrawals and account termination. Asset Allocation Example and Actual Risk Exposure The ratios below are examples for reviewing the structure. They are not recommended ratios suitable for every beginner. In particular, they should be interpreted with the understanding that dividend stocks are also stocks. Asset Example weight Expected role Risk to check Domestic stocks 30% Participate in corporate growth Concentration in the domestic market and specific industries Overseas stocks 25% Participate in the growth of overseas companies Stock price and exchange rate movements Bonds 20% Interest income and reduced volatility Interest rate changes and issuer credit risk Gold 5% Diversification from other assets Price movements and no interest or dividends of its own U.S. dollars 5% Currency diversification Possible foreign exchange losses in Korean won terms Dividend stocks 10% Dividend cash flow Falling stock prices and reduced dividends REITs 5% Real estate-related cash flow Vacancies, borrowing costs, and price movements Total 100% Divide roles among assets Overall risk must be reviewed separately Domestic stocks at 30% and overseas stocks at 25% add up to 55%. Adding 10% in dividend stocks brings the stock allocation to 65%. The 5% in REITs may also decline in price along with the stock market. Bonds, gold, and U.S. dollars together account for 30%. This ratio does not indicate how much loss will be prevented. When interest rates rise, fixed-rate bond prices may fall. You can learn about the relationship between interest rates and bond prices in Investor.gov's bond guide. Comparing Simple Portfolios and Common Mistakes Having more products does not automatically increase diversification. Check both the types of assets and the actual holdings. Multiple ETFs may hold the same companies. Portfolio structure Management method Easy-to-miss point Products tracking the S&P 500, Nasdaq-100, and Dow Jones U.S. Dividend 100 Buy separately by U.S. stock index All focus on U.S. stocks and may have overlapping holdings 60% stocks and 40% bonds Adjust directly to maintain the set ratios Stocks and bonds may decline together TDF-centered Asset manager adjusts asset allocation Overall allocation, including other accounts, must be reviewed directly Direct allocation among multiple assets Manage target ratios for each asset More products and greater management burden An action plan can reduce the tendency to delay decisions while searching for the perfect investment. First understand how the product can generate losses. Then invest only an amount you can bear. Common mistakes include: Viewing gold as an asset that guarantees principal: Gold can also be sold below its purchase price. Classifying dividend stocks as safe assets: Stock price losses may exceed the dividends received. Thinking regular purchases eliminate losses: Buying in installments does not remove the risk of the investment. Reading the distribution rate as the total return: Both distributions and changes in the price of the assets held must be considered. Buying real estate first when the lump sum grows: First consider the concentration of funds and the time required to sell. Example Calculation for Receiving KRW 3 Million a Month From KRW 700 Million Even if KRW 700 million earns 6% annually, receiving KRW 3 million per month after tax is not guaranteed. The calculation below assumes an annual cash dividend yield of 6%. It applies only a withholding rate of 15.4% to ordinary taxable domestic dividends. Calculation item Formula Result Annual pre-tax dividends 700,000,000 won × 6% 42,000,000 won Average monthly pre-tax dividends 42,000,000 won ÷ 12 months 3,500,000 won Annual amount withheld 42,000,000 won × 15.4% 6,468,000 won Annual amount after withholding 42,000,000 won - 6,468,000 won 35,532,000 won Average monthly amount after withholding 35,532,000 won ÷ 12 months 2,961,000 won The 15.4% consists of 14% income tax and 1.4% local income tax. The general withholding structure for taxable fund income can also be found in the Midas Asset Management prospectus. This table does not reflect final tax settlement or separate costs. Annual financial income generally also requires consideration of whether it is subject to aggregate taxation. The threshold for financial income subject to aggregate taxation is KRW 20 million per year. Tax-exempt income and separately taxed income should be assessed separately. Starting with payments made in 2026, a special provision applies to dividends from qualifying high-dividend companies. Separate taxation requires confirming eligibility and submitting an application. The same tax treatment does not apply to every payment simply because it is a dividend. Check the detailed conditions in the National Tax Service's guidance dated March 9, 2026. The annual return of 6% is an assumption for this calculation, not a guaranteed return. The monthly average also differs from the amount actually paid each month. The market value of the principal may also fluctuate. Living Expense Withdrawal Schedules and Investment Cash Flow To cover living expenses with investment returns, payment dates and withdrawal dates must be coordinated. It is difficult to assess monthly spending based only on total annual dividends. Money to use before dividends are paid must also be set aside. Schedule to check Reason for checking Rent, credit card, and insurance payment dates Identify the dates when cash is actually needed Dividend and distribution payment dates Check whether payments arrive before expenses are due ETF sale proceeds settlement date Check the time between selling and withdrawing funds Tax payment dates Set aside money for taxes separately from living expenses Deposit maturity dates Check whether maturity matches the time when the money is needed Domestically listed ETFs generally settle 2 business days after the trade date. Do not assume that sale proceeds can be withdrawn immediately. Check the settlement structure in the Korea Exchange ETF settlement system. Set your financial independence goal based on actual living expenses. List expected income, such as public pensions, separately. Review whether investment assets can cover the remaining expenses. As prices rise, the amount needed to maintain the same standard of living also increases. How to Rebalance After Buying Rebalancing means bringing changed asset weights back in line with target ratios. When prices rise or fall, the original weights also change. New investment funds can also be used to increase underweight assets. Gather the current market values. Review assets across multiple accounts together. Calculate the actual weights. Divide the market value of each asset by the total investment amount. Compare them with the target weights. Also review whether the timing for using the money has changed. Check adjustment costs. Calculate trading fees and taxes. Adjust as much as necessary. Also check whether the allocation can be adjusted through additional contributions. FAQ Q. Should I wait until I finish learning about investing before I start? A. You do not need to learn everything. However, first understand the possibility of losing your principal, the costs, and the conditions for converting the investment to cash. You can start with an amount that will not disrupt your daily life. Q. Does keeping a lump sum in a deposit account also count as asset management? A. A deposit account is also an asset management tool suited to a specific time of use and the goal of preserving principal. If you will use the money soon, first check the maturity date and early withdrawal terms. Q. Do interest rate-based ETFs guarantee returns every day? A. No. They are managed in connection with interest rate benchmarks, but trading prices and costs affect actual returns. They are also not covered by deposit insurance. Q. If I sell an interest rate-based ETF, can I use the money for living expenses right away? A. ETFs listed in Korea generally settle 2 business days after the trade date. Do not assume you can withdraw the money immediately after selling. You need to check when withdrawals are available from your brokerage account. Q. Can I choose a TDF based only on the target year in its name? A. In addition to the target year, you should check the current allocation to stocks and how the allocation changes over time. Even with the same target year, risks and costs vary by product. Q. If I put money into a pension savings account or IRP, is it invested automatically? A. Simply depositing money does not complete the purchase of the products you want. Check the account's investment instructions and the products it actually holds. You should also review separate settings, such as the default investment option system. Q. Can I avoid losing my principal by buying only gold? A. The price of gold can also fall. Gold itself does not generate interest or dividends. Decide whether it suits the goal of diversifying your overall assets. Q. If I buy several U.S. stock ETFs, will that provide sufficient diversification? A. You cannot determine that from the number of ETFs alone. Multiple products may be concentrated in the same country and companies. Check their holdings and the allocation of your overall assets. Q. Can a portfolio of 60% stocks and 40% bonds prevent losses? A. This allocation does not guarantee protection against losses. Depending on market conditions, stocks and bonds can fall at the same time. Set the allocation based on when you will need the money. Q. If I invest 700 million won at 6% annually, will I receive 3 million won per month after taxes? A. Assuming an annual cash dividend yield of 6%, the annual pretax dividend would be 42 million won. Factoring in only the 15.4% withholding tax rate, the monthly average would be 2,961,000 won. The result will vary depending on the final tax and actual dividend amount. Q. Does a high dividend yield mean a high total return? A. You cannot determine total return from the dividend yield alone. The decline in the asset's price may be greater than the dividends received. Account for dividends, price changes, and costs. Q. Should I move my savings into real estate once they grow? A. You do not need to choose real estate simply because the amount has grown. First distinguish between buying for your own residence and buying for rental purposes. You should review the debt burden, concentration of funds, and the time required to sell. Sources - Investor.gov, Asset Allocation and Diversification: https://www.investor.gov/introduction-investing/getting-started/asset-allocation - Financial Services Commission, We Answer All Your Questions. Deposits of Up to KRW 100 Million Protected Starting September 1, July 23, 2025: https://www.fsc.go.kr/no040101?cnId=2817&curPage=81&pastPage=81&srchKey=&srchText= - NH-Amundi HANARO KOFR Interest Rate Active Special Asset Exchange-Traded Investment Trust Prospectus: https://www.hanaroetf.com/_upload/public/fund-new/FB58E7CC6231433E/G410MK10WESAUINX7.pdf - Investor.gov, Target Date Funds Investor Bulletin, March 25, 2025: https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins/target-date-funds-investor-bulletin - Mirae Asset Investment and Pension Center, 23 Ways to Use an IRP Properly: https://investpension.miraeasset.com/file/pdfView.do?fileNm=1685425822834.pdf - Investor.gov, What Are Corporate Bonds?: https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins/what-are - World Gold Council, Potential risks and challenges: https://www.gold.org/goldhub/research/relevance-of-gold-as-a-strategic-asset-2025/risks-and-challenges - Midas Asset Management, Midas KoreaStock Active ETF Prospectus, April 2024: https://midasasset.com/wp-content/uploads/2021/10/tujaseolmyeongseo-maidaseu-maidaseu-KoreaStockaektibeu-jeungkwon-sangjangjisutujasintakjusik_202404.pdf - National Tax Service, Reduced Tax Burden Through Separate Taxation of Dividends from High-Dividend Companies, March 9, 2026: https://www.nts.go.kr/nts/na/ntt/selectNttInfo.do?mi=2163&nttSn=1349597 - Korea Exchange, ETF Settlement System: https://regulation.krx.co.kr/contents/RGL/03/03060102/RGL03060102.jsp Images - Woman reviewing financial reports with pie charts and bar graphs at an office desk: https://injoys.com/rails/active_storage/blobs/proxy/eyJfcmFpbHMiOnsiZGF0YSI6MjA3MTMsInB1ciI6ImJsb2JfaWQifX0=--0f18582bdc0b016ea72819ab9a51f86e9f39787d/ai-70156f5a.webp - Two people reviewing investment charts and an asset allocation graphic at a table: https://injoys.com/rails/active_storage/blobs/proxy/eyJfcmFpbHMiOnsiZGF0YSI6MjA3MTksInB1ciI6ImJsb2JfaWQifX0=--c3505c453f8e8389fd4cb91554a2854e7302d9e4/ai-195c4a00.webp --- Category: How-to Source: https://injoys.com/en/articles/how-to-invest-savings-for-beginners License: cc_by Translation-Status: reviewed