Why teens are snapping up record amounts of Samsung stock worth almost $1 billion

South Koreans below the age of 19 made up 7% of Samsung Electronics shareholders in December of last year.

A record-high 358,257 teens together owned around 1.1 trillion won ($891 million) worth of shares in Samsung in December, according to Korean Securities Depository. The amount owned was equal to 971 billion won ($765 million) at Tuesday’s closing price, the Korean Herald reported.

In total, the stock-savvy teens owned 0.25% of the total shares issued by the tech giant and accounted for 7.07% of all shareholders.

The rise of trading accounts held by younger adults has been a global phenomenon, driven in part by the fiscal and monetary policy measures put in place during the pandemic and the lockdown-induced money-saving, which pushed forward a historic bull run.

But the outsize growth in teen accounts in South Korea may be down to the number of parents who are opening accounts in their children’s names to create a long-term investment tool for the children’s future. “Early stock education,” as it’s called in South Korea, has exploded in recent years, according to the Korea Economic Daily, which found that the number of youth accounts increased in Korea by 800% in 2020.

KB Securities, the fifth-largest brokerage in Korea by asset size, found a 328% increase in the number of accounts made by people below the age of 18 in the first four months of 2022. In the same period, the number of accounts held by people over 19 only increased by 62%.

The more parents invest in stocks, the more likely they are to open an account for their children, Deuk-Hyeon Pyun, deputy head of NH Investment & Securities’ wealth management strategy department, told the Korea Economic Daily.

Early education or risky bets

The growth in retail investing for young adults and their parents indicates the changing reputation of blue-chip stock investment in South Korea. In the past, the method of providing seed money for children usually came in the form of bank deposits and savings accounts, according to the Korea Economic Daily, with the growth in retail investing reflecting its change in perception from risky financial product to long-term investment tool.

That being said, the stock picks made from teen accounts were usually riskier. KB Securities said young customers below the age of 18 were more aggressive in their foreign investments than older customers. Foreign stocks accounted for 12.2% percent on average for young customers, but only 5% for the accounts held by older Koreans.

They also make better returns. An analysis by NH Investment & Securities found that in June 2021, the return on accounts opened for minors under the age of 18 was 11.12%, a marked difference from the average of investors above the age of 20, who yield 7.23% each year.

Top domestic stock picks for young and old investors alike were Samsung Electronics, LG Energy Solutions, and Kakao. Across the board, Samsung was the most favored. Abroad, South Korean Investors found Tesla, Apple, and Microsoft to be the most attractive picks.

“Brokerages would soon be competing to attract teen customers, who are not given as many investment products as their older counterparts—the target audience that has earned them the most profits, until now,” a KB Securities official said.