Navigating Yield: A Guide to Principal-Protected Investments in 2026

As of February 2026, investors are seeking options that balance capital preservation with the desire for returns exceeding traditional deposit rates. Amidst market volatility, several principal-protected investment products offered by South Korean securities companies are gaining traction. This article provides an overview of these options – issued notes, Intensive Investment Accounts (IMAs), and Equity-Linked Bonds (ELBs) – outlining their features, risks, and potential benefits.

Issued Notes: A Deposit-Like Alternative

Securities companies in South Korea are actively promoting “issued notes,” which function similarly to deposits or savings accounts offered by banks. These notes offer a fixed rate of return with principal protection at maturity, typically within a one-year timeframe. There are two main types: contract-type (closer to a deposit) and accumulation-type (closer to a savings account).

Currently, seven securities companies – Korea Investment & Securities, Mirae Asset Securities, NH Investment & Securities, KB Securities, Kiwoom Securities, Shinhan Investment & Securities, and Hana Securities – are authorized to issue these notes. As of mid-February 2026, interest rates on issued notes generally exceed those offered by the five major Korean commercial banks (KB, Hana, Shinhan, Woori, and NH). For example, KB Securities offers 3.2%, Mirae Asset and NH Investment offer 3.05%, and Korea Investment offers 3.2%, although Kiwoom Securities provides 3.25% and Shinhan Investment offers 3.3%. Hana Securities and Shinhan have offered limited-time promotional rates of 3.6% and 4% respectively, targeted at new and younger customers.

Important Note: Unlike bank deposits, issued notes are not covered by deposit insurance. It’s crucial to choose notes issued by financially stable, licensed securities companies.

IMAs: Principal Protection with Performance-Based Returns

Introduced in December 2025, Intensive Investment Accounts (IMAs) offer the potential for higher returns than issued notes, albeit with slightly more risk. Currently offered by Korea Investment & Securities and Mirae Asset Securities, IMAs are performance-dividend type products. The securities company invests the deposited funds in areas like mergers and acquisitions (M&A), and investors share in the profits generated, after deducting management fees.

Both Korea Investment and Mirae Asset currently offer a target annual return of 4%. Investors receive at least the target rate, minus a management fee. If the investment performance exceeds the target, a performance fee is deducted before the excess profit is distributed. For example, a 2-year investment of ₩10 million with a 10% total return (5% annually) could yield approximately ₩778,320 after fees and taxes (assuming a 0.6% management fee and a 40% performance fee split, and applying the 15.4% dividend income tax).

IMA products are often “closed-end,” meaning funds are locked in for a specified period (typically 2-3 years) and early cancellation may not be possible.

ELBs: Linking Returns to Market Performance

Equity-Linked Bonds (ELBs) provide principal protection while offering returns linked to the performance of underlying assets, such as stocks (e.g., Samsung Electronics) or indices (e.g., KOSPI). Returns are contingent on meeting specific conditions, such as a certain percentage increase in the underlying asset’s price. ELB returns can range from around 3% to 7%, depending on the complexity of the conditions.

ELBs share similarities with Equity-Linked Securities (ELS) but offer principal protection (except in the event of the issuing securities company’s bankruptcy). A significant advantage of ELBs is their potential tax benefits when held within a brokerage-type Individual Asset Management Account (ISA). Within an ISA, net profits, including dividends, are exempt from taxation up to ₩2 million, and are taxed at a reduced rate of 9.9% thereafter. This contrasts with the 15.4% dividend income tax applied to issued notes and IMAs.

For example, a ₩20 million investment in an ELB with a 3.5% return within an ISA could yield ₩700,000 in tax-free profit, compared to ₩592,200 after tax on a similar investment in an issued note or deposit.

Key Takeaways

• Issued Notes: Low-risk, deposit-like products with fixed returns, but not covered by deposit insurance.
• IMAs: Potential for higher returns based on investment performance, with principal protection, but funds are typically locked in for a period.
• ELBs: Returns linked to market performance, offering principal protection and potential tax advantages within an ISA.

While offering potentially higher returns than traditional deposits, these principal-protected investments require careful consideration of the associated risks and terms. Investors should thoroughly research the issuing securities company and understand the specific conditions and fees associated with each product.