What Are Issued Notes? Are They Safe to Put Your Money In

Issued notes have been getting a lot of attention lately because they are simple to invest in and often offer higher interest rates than savings deposits. So what exactly are issued notes, and how can you invest in them? And is it really safe and low-risk to put your money into issued notes?

What Are Issued Notes?

Issued notes are certificates of promise that financial companies issue to raise funds. They are similar to bonds. To put it very simply, you can think of them as an IOU.

They are similar to bonds, but the difference is that issued notes can only be issued by firms that have equity capital of at least KRW 4 trillion and have been licensed by the government to run a short-term financing business. Currently, only KB Securities, Mirae Asset, Korea Investment & Securities, and NH Investment & Securities can issue these notes.

In short, issued notes are issued by four government-approved securities firms and serve as proof that a certain amount has been lent and received on a specific date.

How to Buy and Invest in Issued Notes

Issued notes are becoming popular these days as an alternative to savings deposits and installment savings. Why is that? It's because issued notes are short-term products that also offer higher interest rates than parking accounts.

So how can you buy and invest in issued notes? You can buy them from securities firms. You can invest in these notes through an account at KB Securities, Mirae Asset, Korea Investment & Securities, or NH Investment & Securities.

The interest rates on issued notes usually tend to move in line with market interest rates. However, because each securities firm issues its own notes, they sometimes offer higher rates as special promotions, so it's important to seize those opportunities.

Types of Issued Notes

Issued notes are broadly divided into the following three types.

• Open-ended: With open-ended issued notes, you deposit money with no fixed term and can redeem it whenever you want. It's a similar concept to a parking account.
• Installment: You buy notes in monthly installments over a period of up to one year. This is similar to an installment savings account.
• Fixed-term: These notes are settled at terms of 3 months, 6 months, or 1 year. They are similar to a time deposit.

Risks of Issued Notes and Things to Watch Out For

If you're not very familiar with issued notes or are buying and investing in them for the first time, you might be a little worried. To get straight to the point: unlike savings deposits and installment savings, issued notes are not covered by depositor protection, so if the securities firm that issued them goes bankrupt, you could lose your money.

That said, there's no need to worry too much. Since these are very large securities firms, the chance of them going under is low, and market investment ratings classify issued notes as "low-risk" products. Of course, there's no 100% guarantee that these four major financial firms will never fail, so proper risk management is still essential.