It has been shown that by utilizing the fact that the holiday interest reflect days differ between interest rate exchange-traded funds (ETFs), one can gain additional revenue from the price increase during the holiday period.

Since trading is not possible during weekends or holiday periods, asset management companies reflect interest in ETF prices a few days before the holiday. This means that by moving funds between interest rate ETFs considering the interest reflection days, one can receive more interest.

The main character is an ETF that tracks the CD interest rate and the Korean overnight risk-free rate (KOFR). These ETFs do not have the risk of loss as long as they do not switch to a negative interest rate because they track interest rates. The ETF price increases daily by the amount obtained by dividing the interest by 365. If the interest rate is 3.65%, it increases by 0.01 percentage points (p).

Graphic = Son Min-kyun

Many investors utilize this ETF like a parking account (demand deposit account). Currently, the one-year CD interest rate is 2.89%, and the KOFR is 3.11% per year. Considering bank savings accounts that only provide around 3% after meeting all preferential conditions such as salary deposits, it is a suitable product for temporarily parking spare funds.

By investing briefly in these products just before the holiday, one can maximize revenue. On holidays when the ETF cannot be traded, interest cannot be reflected in the price, which is why this increase is reflected in the weekdays beforehand. In other words, it means adding the interest generated on Saturday and Sunday to Thursday or Friday.

Interest is reflected in the CD two business days before the holiday, while KOFR has its interest reflected one business day prior. CDs increase in price by the amount of interest for three days every Thursday, and KOFR does the same on Fridays.

Looking at Samsung Asset Management’s “KODEX CD Interest Active,” the largest CD-type ETF in the country (approximately 1 million won per share), it increases by 75 to 90 won daily but jumps by 270 to 305 won on Thursdays. The “KODEX KOFR Interest Active” (about 100,000 won per share) similarly rises by 5 to 10 won from Monday to Thursday, and 25 to 30 won on Fridays. The timing for the interest reflection of the CD ETF follows the internal policies of each management company, while for the KOFR ETF, it follows the method of the Korea Securities Depository that calculates the index.

Thanks to the differing holiday interest reflection periods of the two ETFs, it is also possible to buy the CD ETF and switch to the KOFR ETF to benefit from price increases on both sides.

Let’s assume that during last year’s Chuseok holiday, cash of 100 million won was invested in a product from Mirae Asset Global Investments. The closing price and price increases all used values from that time.

Considering the Chuseok holiday (Sept. 14-18), one buys 1 million won worth of 'TIGER CD Interest Investment KIS' on Sept. 11 at the closing price (54,915 won) for 1,820 shares. In this case, on the 12th, the interest reflected in the CD ETF adds 35 won per share, resulting in total revenue of 63,700 won. If on the same day, the increased funds are used to purchase 'TIGER KOFR Interest Active' (closing price of 106,535 won at that time, 939 shares), on the 13th, it yields 70 won per share, totaling 65,730 won.

By timing the pre-interest reflection periods of the two ETFs, one can manage to yield 12,9430 won (63,700 + 65,730 won) excluding commissions in just two days using 100 million won. With this year's Seollal holiday including a temporary holiday on Jan. 27, the market will be closed for six trading days, making this strategy likely more effective than last year's Chuseok. Switching between the two stocks means one could capture interest for up to 12 days.

There is no need to feel regret if one could not purchase the parking ETF in advance before the Seollal holiday. The upcoming Chuseok holiday in October will have a continuous break from October 3 to 9, allowing one to capture interest for 14 days. If the sandwich working day on October 10 is designated as a temporary holiday, one might even be able to capture interest for 20 days.

However, because it is an ETF, there is a risk of having to buy at a price higher than desired or sell at a price lower than intended. Due to the lack of tight bidding, one may have to sell at a low price begrudgingly. In this case, one could lose the equivalent of a day's interest or more, so caution is advised.