Strategy for the 2025 NISA

[Beaglehound]

I mean basically everyone says buy bonds of we want to protect ourselves nearer retirement.and if it's so risky, why do we bother?

If the Japanese yen strengthens against the dollar, returns on U.S. bonds held by a yen-based investor could decline once converted back to yen.

That is the risk.

As far as *everyone* saying to invest in bonds. That is dubious. It makes sense for American with access to I-bonds, and risk free-treasuries. Because..there is no currency risk. That is the plus they get for having high inflation and 6.5% 30 year mortgages.

In Japan we have 1.5% 30 year mortgages, and only 2-3% yearly {averaged} over the the last few years. As a result we have very little risk free yield.

Sorry ! I kinda misspoke when I said “everyone says we should invest in bonds. I thought everyone was saying have some as part of a broader portfolio to reduce risk.
But it seems everything has risk and there is the possible gain. One thing is for sure stocks and shares or bonds/guilts are going to deal with currencies.
Are Japanese bonds really worth it?


I’m wondering what peoples portfolio’s consist of?
I am all in stocks at the moment.
Not sure where to diversify now!
I’m legally 10 years out from getting my pension but I’d like to reduce my work in a few years.

I think much depends on how much you need your savings to grow before retirement, i.e. will capital preservation cut it for you or are you needing further significant growth? I am of similar age to you and recently have been investing in a roughly 50/50 stock/bond fund, but with a Japanese bias. Partly this is because I have a fair bit of savings still in a UK savings account so want to limit further overseas exposure. And partly it's because keeping pace with inflation would be enough for me. But, like you, I struggle with what best to do, given that, as discussed, bonds of whatever origin are less than ideal for the Japan-based investor.

[Deep Blue]

I'f my understanding is correct, this currency risk is also apparent in our S&P500 funds/Global funds too?
[/quote]

Yes. It is a strange argument to say don't invest in foreign bonds because of the currency risk and to recommend investing in foreign equities instead. Over a long enough time frame, currency risk is basically irrelevant for equities and bonds.

[Tsumitate Wrestler]

Yes. It is a strange argument to say don't invest in foreign bonds because of the currency risk and to recommend investing in foreign equities instead. Over a long enough time frame, currency risk is basically irrelevant for equities and bonds.

It is not over the long time frame, hes considering de-risking his portfolio in preparation for retirement.

The risk calculation is pretty straightforward.

....

A USD based American investor transitioning their portfolio from largely American equities to incorporate more treasuries, de-risks their portfolio. They faced virtual no currency risk over their investing lifespan. Their risk reduction is primarily through reducing exposure to equity volatility.

A YEN based investor transitioning from largely American equities to American bonds, de-risks their portfolio to a much lesser degree as the currency risk is still present, even as the expose to equity volatility is reduced.

The same remains true for the global equity or global bond investor.

.....

When one sources investing information in English, the mast majority of it will be tuned to American investors, who do not really need to face any currency risk to have a fairly diversified portfolio.

[Deep Blue]

It is not over the long time frame, hes considering de-risking his portfolio in preparation for retirement.

So global equities over global bonds is de-risking for retirement, hmm ok. Not sure you have really thought this through.

[Tsumitate Wrestler]

So global equities over global bonds is de-risking for retirement, hmm ok. Not sure you have really thought this through.

Are we having a conversation in good faith here? I can put it more succinctly.

De-risking strategies vary for non-U.S. investors, as currency risk persists. This holds true even when shifting from foreign equities to bonds, unlike for U.S.-based investors who face minimal currency exposure in a U.S.-centric portfolio.

If one is moving from equities to bonds to reduce risk, they most be cognisant of this and consider other options.

[Bubblegun]

If the Japanese yen strengthens against the dollar, returns on U.S. bonds held by a yen-based investor could decline once converted back to yen.

That is the risk.

As far as *everyone* saying to invest in bonds. That is dubious. It makes sense for American with access to I-bonds, and risk free-treasuries. Because..there is no currency risk. That is the plus they get for having high inflation and 6.5% 30 year mortgages.

In Japan we have 1.5% 30 year mortgages, and only 2-3% yearly {averaged} over the the last few years. As a result we have very little risk free yield.

Sorry ! I kinda misspoke when I said “everyone says we should invest in bonds. I thought everyone was saying have some as part of a broader portfolio to reduce risk.
But it seems everything has risk and there is the possible gain. One thing is for sure stocks and shares or bonds/guilts are going to deal with currencies.
Are Japanese bonds really worth it?


I’m wondering what peoples portfolio’s consist of?
I am all in stocks at the moment.
Not sure where to diversify now!
I’m legally 10 years out from getting my pension but I’d like to reduce my work in a few years.

I think much depends on how much you need your savings to grow before retirement, i.e. will capital preservation cut it for you or are you needing further significant growth? I am of similar age to you and recently have been investing in a roughly 50/50 stock/bond fund, but with a Japanese bias. Partly this is because I have a fair bit of savings still in a UK savings account so want to limit further overseas exposure. And partly it's because keeping pace with inflation would be enough for me. But, like you, I struggle with what best to do, given that, as discussed, bonds of whatever origin are less than ideal for the Japan-based investor.

Now thats a great question. Am i needing moooooore growth? I suppose more is always better,and according to the japanese governmnet they say we need about 24 million yen in savings, and I'm ok with that. But it's not enough to retire on. (IMHO)
Now I will be at 28,million area. but how much more do we need? Ofcourse there is the "DEPENDING ON YOUR LIFE STYLE" question, and i guess everyone has this dream we're jet setting around, buying yachts, or travelling the world. But thats not really my style to be honest.
I'm happy toddling around coffee shops, cinema,bit of Netflix, a few hobbies, going out for sushi a couple of times, buying a few X-mas gifts if the kids get married or have kids.Maybe help out.
SO how do we define significant growth? I was going to take the RetireJapan financial course, but thats more geared to those who are looking to start. If i go to a financial advisor,( and those guys really really put up a red flag for me) the gits, missold us endowment policies, stole my wife's pension,(back in the day) mis-sold a PPI scam in the UK, and the list goes on. As soon as I hear the word FINANCIAL ADVISOR, i really hear, dodgy salesman. How doi know it? Well aprtly experience, and also a friend, worked for a certain UK investment company, and his job was to punt financial products to the salesmen, and they did it by giving them a % for the lifetime of the investment.

So this has been a good place to get good objective advice, without someone having commision stuck away in their mind.

[Deep Blue]

If there is one thing everyone here can agree on, it’s to deeply mistrust anything a financial adviser tries to sell you. The best policy is not to talk to them in the first place.

[Bubblegun]

So global equities over global bonds is de-risking for retirement, hmm ok. Not sure you have really thought this through.

Are we having a conversation in good faith here? I can put it more succinctly.

De-risking strategies vary for non-U.S. investors, as currency risk persists. This holds true even when shifting from foreign equities to bonds, unlike for U.S.-based investors who face minimal currency exposure in a U.S.-centric portfolio.

If one is moving from equities to bonds to reduce risk, they most be cognisant of this and consider other options.

Thanks for that. Currency risk was never in my thoughts with bonds. I realize all the Youtubers are giving advice to the "home investor" not the international investor when it comes to bonds.
I wonder, if the poop hits the fan in the US, would i be better to put the money into the NIKKEI 225?

[Deep Blue]

Thanks for that. Currency risk was never in my thoughts with bonds.

People here are overly fixated with it I believe. It really is no more of a risk than with equities.

[Deep Blue]

I wonder, if the poop hits the fan in the US, would i be better to put the money into the NIKKEI 225?

If the US sneezes, the rest of the world will catch the cold. The Japanese stock market is especially sensitive to global economic growth as the composition is far more cyclical than nost other developed markets.