Does my iDeCo allocation make sense?

[Gareth]

Hi all,

I've had my iDeCo going for almost a year now. Am going to do some calculations to see if I can raise the amount I put in. But first, I want to revisit the allocation I started with to see if I'm doing it right.

I went with:

30% Japan domestic shares Ｏｎｅ　ＤＣ　国内株式インデックスファンド https://fund.monex.co.jp/detail-ideco/47311079
20% Japan domestic bonds 三菱ＵＦＪ　国内債券インデックスファンド（確定拠出年金）https://fund.monex.co.jp/detail-ideco/0331112A
20% developed country shares ｅＭＡＸＩＳ　Ｓｌｉｍ　先進国株式インデックス https://fund.monex.co.jp/detail-ideco/03319172
10% emerging markets shares ｅＭＡＸＩＳ　Ｓｌｉｍ　新興国株式インデックス https://fund.monex.co.jp/detail-ideco/0331C177
20% overseas bonds ｅＭＡＸＩＳ　Ｓｌｉｍ　先進国債券インデックス https://fund.monex.co.jp/detail-ideco/0331A172

I'm 41 years old so have almost 20 years left to go. For the bond allocation, I started with 40% to match my age. That percentage for my investments as a whole will go down as my t-NISA grows so will revisit that again in a few years. My thinking for choosing five funds was to spread the risk and not put all my eggs into the US market.

Do you think I'm close to having done well here or am I miles off? Many thanks for any help you can give me.

[RetireJapan]

Very overweight Japan (makes up about 10% of the world stock market) and if you are also investing in taxable accounts you might want to put the bonds there instead (use the tax exempt accounts for stocks as they are likely to grow more and the taxable accounts for bonds as they are likely to grow less).

[Bushiman]

If you are also investing in taxable accounts you might want to put the bonds there instead (use the tax exempt accounts for stocks as they are likely to grow more and the taxable accounts for bonds as they are likely to grow less).

This. I'm 40 and have zero bonds in my iDeCo... All stocks -75% US, 25% Global (which is ~50% US)... Very US weighted but then, that's how I roll...
When I first started out, I did allocate a small percentage of my NISA to a developed country bonds fund, but soon gave up on that and invest in only the eMaxis Slim All-Country fund... I'm currently putting zero ¥¥¥ into bonds and will likely continue to do so for the next 10~15yrs...

[adamu]

My thinking for choosing five funds was to spread the risk and not put all my eggs into the US market.

The easiest way to do that with Monex's iDeCo (for stocks) is to buy eMaxis Slim All Country, which represents the MSCI All Country World Index.

Any other ratio and you are making a bet that your ratio will perform better than the global market.

MSCI ACWI is currently about 60% US, Japan is the 2nd biggest country at about 6%.

[Gareth]

Very overweight Japan (makes up about 10% of the world stock market) and if you are also investing in taxable accounts you might want to put the bonds there instead (use the tax exempt accounts for stocks as they are likely to grow more and the taxable accounts for bonds as they are likely to grow less).

Some great points, thank you.

Reflecting on your comment for the past few days, you're totally right, I am a bit Japan heavy. Thanks for pointing that out.

In the future, I may invest in bonds in my taxable account, but for now, I'm not yet maxing out my iDeCo and NISA so will work towards doing that first. But it's a good goal to work towards. Thanks.

[Gareth]

My thinking for choosing five funds was to spread the risk and not put all my eggs into the US market.

The easiest way to do that with Monex's iDeCo (for stocks) is to buy eMaxis Slim All Country, which represents the MSCI All Country World Index.

Any other ratio and you are making a bet that your ratio will perform better than the global market.

MSCI ACWI is currently about 60% US, Japan is the 2nd biggest country at about 6%.

Thanks Adamu. You make a great point. You've given me something to think about, thanks!

[beanhead]

I would swap the 50% Japan allocation and just buy more of this one, personally:
ｅＭＡＸＩＳ　Ｓｌｉｍ　先進国株式インデックス

[Gareth]

I'm going to change my allocation. But before I do, I have a question about the process please.

On the JIS&T website, there is one page to simply change the allocation and another page called switching.

Am I right in thinking that if I simply change the allocation, future purchases will follow this new allocation and the old stuff will remain in my iDeCo account? And if I go through the switching section, what I have is sold (or I can choose what to sell) and the proceeds go towards buying more of the new funds I have allocated?

I currently have five funds and am going down to two funds. Four of the five funds are not in my new allocation and two of those four are currently running at a loss. One of the funds, I am going to buy more of and I am going to buy a new fund.

Should I just go through the simple page and change the allocation and leave switching alone?

[RetireJapan]

Yes, changing the allocation will affect your future purchases but not your current holdings.
Switching will change your current holdings (to new ones) but not affect your future purchases.

Sounds like you might need to do both.

[beanhead]

I currently have five funds and am going down to two funds. Four of the five funds are not in my new allocation and two of those four are currently running at a loss. One of the funds, I am going to buy more of and I am going to buy a new fund.

Should I just go through the simple page and change the allocation and leave switching alone?

Since you have 20 years left to pay in, why not leave the switching until later?
So change your allocation to your 2 preferred funds now.
Then, when the funds that are losing money start to make a bit, switch them then.

Unless you think these funds will never start showing gains, it doesn't seem ideal to lock in your loss. Of course, if it is only small and you want the benefits of simplifying the iDeCo, then switching and losing a little is not going to hurt too much...