Does it make sense to continue with the same strategy with this JPY/USD rate?

[Deep Blue]

Like I've said in other threads, I do feel its really not ideal to have all ones eggs in a single currency basket.

If we get hung up on only JPY based returns, or only USD based returns or whatever we're going to constrain our investment options and lock ourselves in to the strength or weakness of a single currency over the long term.

I prefer to think of having a pot of JPY to invest, a pot of dollars, a pot of GBP etc... and make investments based in the local currency returns without worrying about translating it all back to JPY all the time. I firmly believe that none of us can predict future forex levels and the idea of only thinking about returns in JPY limits investment opportunties and needlessly concentrates risk into a single currency.

Ultimately forex is a zero-sum game and by having a broadly diversified pot of investments & currencies is a sensible strategy for most IMHO.

[Tkydon]

BlackRock
https://www.blackrock.com/jp/individual ... und-hedged
https://itf.minkabu.jp/fund/48312159

MCSI
https://nextfunds.jp/lineup/2514/

iFREE
https://itf.minkabu.jp/fund/04319178

Nissei
https://www.nam.co.jp/fundinfo/nzkkfk/main.html

SBI Has a list of Hedged Funds
https://www.sbisec.co.jp/ETGate/WPLETmg ... 60406.html

JPX Has a list of Hedged ETFs
https://www.jpx.co.jp/equities/products ... es-03.html

[Tsumitate Wrestler]

Like I've said in other threads, I do feel its really not ideal to have all ones eggs in a single currency basket.

If we get hung up on only JPY based returns, or only USD based returns or whatever we're going to constrain our investment options and lock ourselves in to the strength or weakness of a single currency over the long term.

I prefer to think of having a pot of JPY to invest, a pot of dollars, a pot of GBP etc... and make investments based in the local currency returns without worrying about translating it all back to JPY all the time. I firmly believe that none of us can predict future forex levels and the idea of only thinking about returns in JPY limits investment opportunties and needlessly concentrates risk into a single currency.

Ultimately forex is a zero-sum game and by having a broadly diversified pot of investments & currencies is a sensible strategy for most IMHO.

If you own a world fund, you own multi-currency exposure adjusted to the current global market. You cannot ask for more diversity.

The fact that the fund is denominated in yen is ultimately irrelevant.

[alberto]

Thank you for this list. I also did this survey some time ago, and I concluded that the one I shared before was the best, in terms of fees and in terms of replicating a standard World index.

A hedged fund does not protect you from volatility. It helps hedge against losses that might occur if the yen appreciates. It's a bet....in one direction only.

I don't think that's correct. Look at the chart I shared yesterday in this same thread. The unhedged ETF is now about 50% higher than the hedged one. If it goes in one direction, it can go in the other as well.

If you own a world fund, you own multi-currency exposure adjusted to the current global market. You cannot ask for more diversity. The fact that the fund is denominated in yen is ultimately irrelevant.

I don't think that's correct either. If you own a world fund, like the most common MSCI-World or similar, then you are mostly buying USD with your JPY, and only in a small part buying other currencies. I don't think that's diversity, that's speculating in the FOREX based solely on JPY, so depending on how JPY goes, everything else will go in the opposite way. If your sallary is in JPY and you live in Japan, you don't need any currency "diversity" investing in FOREX. By investing in foreign stocks you are already getting diversity in a positive-sum game if you do it well. By just unhedging your World fund, you're just surfing the currencies.

Like I've said in other threads, I do feel its really not ideal to have all ones eggs in a single currency basket. If we get hung up on only JPY based returns, or only USD based returns or whatever we're going to constrain our investment options and lock ourselves in to the strength or weakness of a single currency over the long term.

Well, now your words sound different than your previous message, where you said that hedging was taking an active view and speculating. If you think you can get an additional profit by speculating in FOREX, then it may be OK to use unhedged funds, but for me that's more speculative than avoiding the appreciation/depreciation of JPY. If your sallary is in JPY and your spendings are in JPY, going out to buy/sell USD or other currencies (with unhedged funds) with your JPY is investing in FOREX, and not even that, but just accepting what the JPY/USD does in every moment.

[Tsumitate Wrestler]

A hedged fund does not protect you from volatility. It helps hedge against losses that might occur if the yen appreciates. It's a bet....in one direction only.

I don't think that's correct. Look at the chart I shared yesterday in this same thread. The unhedged ETF is now about 50% higher than the hedged one. If it goes in one direction, it can go in the other as well.

If you own a world fund, you own multi-currency exposure adjusted to the current global market. You cannot ask for more diversity. The fact that the fund is denominated in yen is ultimately irrelevant.

I don't think that's correct either. If you own a world fund, like the most common MSCI-World or similar, then you are mostly buying USD with your JPY, and only in a small part buying other currencies. I don't think that's diversity, that's speculating in the FOREX based solely on JPY, so depending on how JPY goes, everything else will go in the opposite way. If your sallary is in JPY and you live in Japan, you don't need any currency "diversity" investing in FOREX. By investing in foreign stocks you are already getting diversity in a positive-sum game if you do it well. By just unhedging your World fund, you're just surfing the currencies.

Like I've said in other threads, I do feel its really not ideal to have all ones eggs in a single currency basket. If we get hung up on only JPY based returns, or only USD based returns or whatever we're going to constrain our investment options and lock ourselves in to the strength or weakness of a single currency over the long term.

Well, now your words sound different than your previous message, where you said that hedging was taking an active view and speculating. If you think you can get an additional profit by speculating in FOREX, then it may be OK to use unhedged funds, but for me that's more speculative than avoiding the appreciation/depreciation of JPY. If your sallary is in JPY and your spendings are in JPY, going out to buy/sell USD or other currencies (with unhedged funds) is investing in FOREX, and not even investing with knowledge, but just accepting what the JPY/USD does in every moment.

I think you might want to read through the prospectus, or perhaps pick a hedged ETF on the NYSE or NASDAQ that has an English prospectus. You need to understand how hedging is done.

Again it's usually just a normal tracker with currency forwards, futures or options. It's not a panacea, it's not volatility insurance.

You can definitely lose more money with them, there is risk. Make sure you understand that risk, and the underlying mechanism.

When you buy a hedged fund, you are better on the yen gaining in value against the dollar, along with the underlying assets appreciating. It's that simple, you are not taking a neutral position.

[Deep Blue]

Well, now your words sound different than your previous message, where you said that hedging was taking an active view and speculating. If you think you can get an additional profit by speculating in FOREX, then it may be OK to use unhedged funds, but for me that's more speculative than avoiding the appreciation/depreciation of JPY. If your sallary is in JPY and your spendings are in JPY, going out to buy/sell USD or other currencies (with unhedged funds) with your JPY is investing in FOREX, and not even that, but just accepting what the JPY/USD does in every moment.

You appear have a very strong view that JPY will appreciate. Go for it, follow your beliefs. There is a 50/50 chance you're right. It is your money and your decision.

I know what I don't know, and speculating on forex is very much in that realm. For that reason I will keep investing without worrying too much about currency.

[alberto]

I think you might want to read through the prospectus, or perhaps pick a hedged ETF on the NYSE or NASDAQ that has an English prospectus. You need to understand how hedging is done.

Again it's usually just a normal tracker with currency forwards, futures or options. It's not a panacea, it's not volatility insurance.

You can definitely lose more money with them, there is risk. Make sure you understand that risk, and the underlying mechanism.

When you buy a hedged fund, you are better on the yen gaining in value against the dollar, along with the underlying assets appreciating. It's that simple, you are not taking a neutral position.

By definition from any hedged fund/ETF: "For assets denominated in real foreign currencies, we hedge foreign exchange rates to reduce the risk of exchange rate fluctuations." Well, that's exactly what I need, specially at this very moment where we are reaching a top high in decades in the JPY value. If it's a panacea or not depends on what you look for. You say that "it's not volatility insurance", but I think it is exactly that, at least regarding to JPY currency fluctuation, which is having a HUGE effect in the last 2 years, and if that effect reverses to the mean, it will look very ugly. I don't want to have that kind of volatility which is totally out of my control. I only accept the volatility of a portfolio of diversified stocks because I believe they will go up in the long term.

[alberto]

You appear have a very strong view that JPY will appreciate. Go for it, follow your beliefs. There is a 50/50 chance you're right. It is your money and your decision.

I know what I don't know, and speculating on forex is very much in that realm. For that reason I will keep investing without worrying too much about currency.

But my point is just the opposite. I do believe that JPY will appreciate, but my decision to use hedged ETF is not particularly because of that, but to avoid the HUGE effect we have seen the JPY fluctuation has when you buy foreign stocks in USD with your JPY. I won't have any 50/50 change of being right or wrong, that's you choosing to buy USD, because that specific purchase can appreciate or depreciate, but if you hedge the currency, you don't care anymore about what will happen with the USD/JPY. That's my point, that you ended saying "I will keep investing without worrying too much about currency", but just the opposite is true. You wouldn't have to worry about currency if you hedged it, but if you don't, then the return of your investment will depend a lot on the currency fluctuations.

[Deep Blue]

Like I said, follow your beliefs. It would have been a losing proposition to hedge at 110, 120, 130 or 140… but if 150 is your line in the sand and you’re confident it in feel free to put your money where your mouth is and speculate on JPY appreciation.

[Tsumitate Wrestler]

I think you might want to read through the prospectus, or perhaps pick a hedged ETF on the NYSE or NASDAQ that has an English prospectus. You need to understand how hedging is done.

Again it's usually just a normal tracker with currency forwards, futures or options. It's not a panacea, it's not volatility insurance.

You can definitely lose more money with them, there is risk. Make sure you understand that risk, and the underlying mechanism.

When you buy a hedged fund, you are better on the yen gaining in value against the dollar, along with the underlying assets appreciating. It's that simple, you are not taking a neutral position.

By definition from any hedged fund/ETF: "For assets denominated in real foreign currencies, we hedge foreign exchange rates to reduce the risk of exchange rate fluctuations." Well, that's exactly what I need, specially at this very moment where we are reaching a top high in decades in the JPY value. If it's a panacea or not depends on what you look for. You say that "it's not volatility insurance", but I think it is exactly that, at least regarding to JPY currency fluctuation, which is having a HUGE effect in the last 2 years, and if that effect reverses to the mean, it will look very ugly. I don't want to have that kind of volatility which is totally out of my control. I only accept the volatility of a portfolio of diversified stocks because I believe they will go up in the long term.

I am not commenting on whether or not it would be a good idea to hedge at 149/150.

Are you prepared for these possibilities?

Downside Risk
1. Yen depreciates and stocks drop. Your investment is very underwater
2. Yen depreciates and stocks are flat. Your investments are underwater.
3. Yen depreciates and stocks rise. Your profits are severely cut.
.............................
Upside
1. Yen appreciates, stocks drop. Flat investment
2. Yen appreciates stocks are flat. FX profit
3. Yen appreciates, stocks appreciate. Large upside.

Also remember the downside is not just the extra fee for forex hedging, but all the money spent on those forward contacts, and all the money kept in cash. That will hurt your returns.

Good luck