alberto wrote: ↑Wed Oct 25, 2023 12:54 pm
Tkydon wrote: ↑Wed Oct 25, 2023 10:16 am
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.
Tsumitate Wrestler wrote: ↑Wed Oct 25, 2023 9:47 am
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.
Tsumitate Wrestler wrote: ↑Wed Oct 25, 2023 10:22 am
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.
Deep Blue wrote: ↑Wed Oct 25, 2023 10:03 am
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.
Hedge Ari ヘッジ有 - Means the Exchange Rate is Hedged so that the instrument moves (hopefully exactly) opposite to the Exchange Rate, so that the result is (hopefully exactly) the movement in the underlying in the Base Currency.
If you invest in the S&P, and the S&P goes up 20% in USD, but the Yen Strengthens 30%, then:
In an Unhedged Fund, you would lose 10% in Yen Terms due to the adverse movement of the Yen reducing the Yen Value of the Dollars, even though the value has gone up in Dollar terms.
On the other hand, if in a Hedged Fund, the Yen Hedge will move in the opposite direction to the Exchange Rate so that the S&P 20% increase in USD will be reflected directly in the Yen value of the Fund which will also go up 20%, removing any and all movement of the currency from the performance of the Fund or ETF.
This has nothing to do with Currency Volatility. The Yen Hedge removes all exchange rate volatility. Volatility is only relevant to the institution providing the Hedge.
I wrote somewhere else:
If the Underlying Instrument goes Up and the Yen Weakens, the gain in USD terms will be amplified in Yen terms.
If the Underlying Instrument goes Down and the Yen Strengthens, the loss in USD terms will be amplified in Yen Terms.
If the Underlying Instrument goes Up and the Yen Strengthens, or the Underlying Instrument goes Down and the Yen Weakens, the gain or loss will depend on the relative movements of the Underlying Price vs. the Exchange Rate. First the gain or loss will be attenuated and then reversed, as in the case above, where the S&P goes up in USD terms, but results in a loss in Yen Terms, or as was the case last year, the S&P went down drastically in USD terms, but resulted in flat performance, even to a profit in Yen Terms due to the opposite weakening of the Yen.
This was great in the direction from 120 to 150, but may not be so good if the exchange rate ever goes back from 150 to 120...