Idea for Investments in JPY beyond traditional assets

[VG1]

Not sure where to write this but this category is probably the most appropriate.

I have a rather large lump sum in JPY to invest (retirement allowance).

My current investments are already 75 % in foreign currency, and I do not want to increase this as I will probably spend the rest of my life in Japan.
I will keep half of this money in JPY cash as I have a lot of expenses in the coming 7 years related to my kids. But I am looking for ideas to invest the remaining half.

I do not want to invest in JPY bonds (yield to low), direct real estate, or Japanese stocks (have enough already.
I am thinking to allocate some to Japanese REITS but not everything.

So, I am trying to find others JPY assets to invest in and would be grateful to hear ideas from people in a similar situation. I know it depends on the size of the investment but just looking for general ideas.

My investment horizon is 10 years and the return I am looking for is at least 5 % with a max volatility around 20 %.

Thanks in advance.

[captainspoke]

You may be familiar with it, but IMO the bucket approach is good (for retirees). Bucket 1 is your immediate needs, up to maybe 5yrs. Bucket 2 is intermediate, maybe 5 to 10yrs. Bucket 3 is the last, a time horizon of 10yrs+.

This doesn't really answer your request for ideas, but given your last comment of a 10yr horizon, I'd probably go with equities.

Good luck!

[VG1]

Thanks, Captainstoke. I have heard about the bucket strategy but have not looked at in in detail. I will research it. Maybe as you say adding to Japanese stocks in the best in my case. Let's see if other ideas come.

[TokyoBoglehead]

My investment horizon is 10 years and the return I am looking for is at least 5 % with a max volatility around 20 %.

Thanks in advance.

...and a rabbit in a hat with a bat and a '64 Impala.

That wish list does not really exist. If you have USD, simply buying and holding treasuries to duration would be fine. However, buying the USD with JPY introduces potentially risk and volatility outside your range.

Most Japanese index investors tend to recommend.

1. Your Choice of US/Developed/Global stock fund
2. Holding other assets in YEN or JGBs
-> Rebalance as you age, or your risk tolerance changes.

REITs and Japanese stock introduces more volatility and risk concentration, which seems to be against your stated goals.

Bottom line, if you want 5% you need to take risk. That risk will introduce volatility.

[sutebayashi]

You might like to play with
https://myindex.jp/user/myaa.php

Plugging in J-REITs gives interesting results. But a diversified approach would give me more piece of mind.

[mighty58]

Bottom line, if you want 5% you need to take risk. That risk will introduce volatility.

This is the truth right here. But I'd like to better understand why the volatility is such a concern for you. Volatility is a given condition, and for individual investors, we overcome that by focusing on the long term. Is there something happening in 10 years that is going to force you to cash in at that time? Because if not, and if in 10 years, we just happen to be in a market downturn, you always have the choice to leave it in.

[VG1]

Thanks to all of you

@ Booglehead
I am not so risk avert considering volatility is ok for me up 20 %. Having said that I know that 5 % is high return in JPY and that probably only Japanese equity fits my criteria. I just wanted to know if somebody had miracle idea!

@sutebayashi
Very interesting. I will definitely play with it.

@mighty 58
A lot of food for thought. By 10 years I am thinking minimum 10 years because less than that I would not invest in risky assets. But nothing special in 10 years.

Reading various advises so far, the best is probably to increase my Japanese equity allocation because it is the only asset class in JPY that is in line with my risk return profile. It was not my initial idea because I thought I already had enough but I think I need to reconsider.

Actually, I think that I need to rethink my whole assets /currency allocation. For this, Sutebayashi tool should be very helpful.

[TokyoBoglehead]

Thanks to all of you

@ Booglehead
I am not so risk avert considering volatility is ok for me up 20 %. Having said that I know that 5 % is high return in JPY and that probably only Japanese equity fits my criteria. I just wanted to know if somebody had miracle idea!

@sutebayashi
Very interesting. I will definitely play with it.

@mighty 58
A lot of food for thought. By 10 years I am thinking minimum 10 years because less than that I would not invest in risky assets. But nothing special in 10 years.

Reading various advises so far, the best is probably to increase my Japanese equity allocation because it is the only asset class in JPY that is in line with my risk return profile. It was not my initial idea because I thought I already had enough but I think I need to reconsider.

Actually, I think that I need to rethink my whole assets /currency allocation. For this, Sutebayashi tool should be very helpful.

Why are you focusing on JPY asset classes? You horizon is 10 years. Go with American or global equities.

Currency fluctuation over a decade will be less important than the increased growth.

A simple TYO list S&P500 ETF or Trust would be better IMO than most Japanese equity or Refits indexes or single stocks over 10 year.

[VG1]

My focus on JPY is because:

1)I am already invested 75 % foreign currency and only 25 % JPY even though I am likely to finish my life in Japan.
2) Current level of JPY. I remember the USD/JPY at 75 in 2011. I would have been less hesitant if the JPY was in its 105-115 it used to bee before the crazy fall of this past year.
3) Maybe we are at turning point for Japan monetary policy.

But I agree that for a long time your suggestion to invest in foreign assets has been the best.

[captainspoke]

https://www.fool.com/investing/2020/11/ ... you-money/

That's a couple years old, but the message is still valid. There have been some comparable articles on the RetireJapan blog which similarly line up the numbers on long term investment in the overall market (or the S&P500 as a proxy for that).

Mix in some international if you want (Emaxis all country?), tho there is the point that large US multinationals in the S&P500 are...multinational. (Eg, an internet factoid: "Roughly 40% of S&P 500 revenues are generated outside of the U.S., and about 58% of Information Technology company sales were sourced from abroad. Oct 3, 2022")