Bonds and Currency Risk

[Curiosity]

(Non-American, 3 Family Nisas, 2 iDecos, 2 Taxable. All mostly Emaxis Slim All country or Emaxis Slim Kokusai)

This question relates only to Bonds, our iDecos and Nisas are 100% equities now and purchases automatically monthly. Potentially any bond purchases would be in our taxable accounts.

.......................

It seem most investor in this forum are mostly equities/cash, with little fixed income.

A. JGBs rates are incredibly low.
B. Hedged products have terrible returns that match JGBs over time. (Vanguard Paper)
C. Emaxis Slim Developed, or TYO Treasury ETFs offer some return, but at greater currency risk.

The Japanese guides I have found (from what I understand) seem to recommend C. for longer-term investing. But only when the Yen is not weak to the dollar.

So essentially, hold yen until YEN/USD improves if you are considering purchasing bonds. Thoughts or comments?

[Tkydon]

Given the current level of USDJPY @ 124.88 (11-Apr-2022)

This is close to the limit of the range of USDJPY over the last 12 Years,
12 Year Min 75.98 per $
12 Year Max 125.49 per $

so it would probably be a good time to consider converting USD to Yen for maximum Yen.

so it would probably not be a good time to consider converting Yen to USD.

I wrote somewhere else...

viewtopic.php?p=22352#p22352

Therefore, I define brackets of the USDJPY as follows - All else being equal:

Very Strong - 0-25 Percentile - 76 to 88 - Buy Only Overseas Assets
Strong - 25-50 Percentile - 88 to 101 - Buy Mostly Overseas Assets
Neutral to Weak - 50-75 Percentile - 101 to 113 - Buy Relatively More Overseas Assets
Relatively Weak - 75-90 Percentile - 113 to 120 - Buy Relatively More Domestic Assets
Very Weak - Bottom 90-100 Percentile - 120 to 125 - Buy Only Domestic Assets


Buy domestic Japanese assets now and switch to Overseas assets when they are again offered at bargain prices due to a strong Yen

[Tkydon]

As for Bonds, I think we are in for a bumpy ride.

If you buy a Bond at say 2% Yield and pay say $98 for it...
And then Interest Rates go up to 4%, then in order to sell it you would have to sell it for $96 to match the market. losing $2...

If you buy a Bond Fund, it will have lots of Bonds of varying durations, and maturing bonds rolling off the books will be replaced with similar bonds at the higher interest rates, but this may still impact the value of the Fund and one's portfolio in the short- to mid-term. In this uncertain time of potentially rising interest rates and Quantitive Tightening in the post-Covid world, I am not inclined to consider buying bonds or bond funds at this time, despite the threat of global inflation.

[beanhead]

This question relates only to Bonds, our iDecos and Nisas are 100% equities now and purchases automatically monthly. Potentially any bond purchases would be in our taxable accounts.

I do exactly this. Equities in NISA and iDeCO. Buy a little bit of the eMaxis Slim developed bond fund in my taxable.

If you are still in the accumulating phase, and have a high tolerance for paper losses in your portfolio, you could ignore the bond idea completely and stay 100% equity. I want to do that, but I know a 50% paper loss would annoy me.
So I buy some of the bond fund for my own peace of mind. I think of it as like cash, to be honest. But nothing close to the traditional 40% of the portfolio.

[Haystack]

This question relates only to Bonds, our iDecos and Nisas are 100% equities now and purchases automatically monthly. Potentially any bond purchases would be in our taxable accounts.

I do exactly this. Equities in NISA and iDeCO. Buy a little bit of the eMaxis Slim developed bond fund in my taxable.

If you are still in the accumulating phase, and have a high tolerance for paper losses in your portfolio, you could ignore the bond idea completely and stay 100% equity. I want to do that, but I know a 50% paper loss would annoy me.
So I buy some of the bond fund for my own peace of mind. I think of it as like cash, to be honest. But nothing close to the traditional 40% of the portfolio.

Gotcha, similar situation. Did you got with Emaxis Slim Developed Bonds, or an ETF?

I will probably stay at 100%, and have my wifes investments at 80/20. She has been convinced by my arguments for investing, but we haven't been through a bear market yet!

We will will only be buying equities though until the Yen improves or at least stabilizes. I am hoping for a Japanese version of Tips in the future, there used to be something like that!

[beanhead]

Gotcha, similar situation. Did you got with Emaxis Slim Developed Bonds, or an ETF?

We will will only be buying equities though until the Yen improves or at least stabilizes. I am hoping for a Japanese version of Tips in the future, there used to be something like that!

I buy this one: Emaxis Slim Developed Bonds. No ETFs for me, just funds and a few individual stocks.
Yeah, TIPS would be nice.
When I get to 60, or the stage when we need to maintain the size of the portfolio, I will think again and see what is available then.

My total return on that bond fund is 0.6%, so slightly better than cash (over the last 18 months).