４５歳でアーリーリタイアして資産生活

[mighty58]

I thought I'd start a thread to discuss this Japanese early retiree's blog that someone mentioned in another thread. I'm interested in hearing other's thoughts. Here's the link: https://zz597.blogspot.com/

I've been poking about his blog, and although I certainly haven't read everything, to summarize his situation:
1. He decided to pull the trigger at the 1oku-yen point.
2. His strategy is to live off dividends, rather than selling down holdings (although he doesn't rule it out).
3. His dividends come from corporate bonds and REITs, which he projects will generate 240man (i.e. 20man/month) per year. Details with chart here: https://zz597.blogspot.com/2019/04/retire-income.html
4. His plan is to live on approx. 20man/month, so in theory, he shouldn't be eating into his principle much.

A few other points:
- he maried but has no kids. it's not clear if his wife works or not.
- he appears to have a fully paid-off home
- he seemed to be making approx. 10-11mil per year as a salaryman before retiring in Dec 2018.

Any thoughts on his strategy? I can understand the logic of how he's structured his portfolio with the focus on income generation, but maybe he's concentrating his holdings too much?

[eyeswideshut]

As I posted in the other thread, his asset allocation seems to be quite high risk, low reward. His primary asset allocation is to corporate bonds (Softbank, Citi and Goldman Sachs) and Japanese REITs in 2nd place. With respect to the bonds, while the interest is pretty much guaranteed, there is the risk to principal if one of those entities goes bankrupt. He could be getting a similar or better yield even deducting the management fees from an ETF like BND (or the Japanese equivalent) which aggregates all bonds government and corporate AND have almost 0 risk of default.

With respect to the REITS, I think this is a more reasonable allocation but again, since he focuses on domestic only, he is running the risk if the Japanese property market takes a strong downturn. If it were me, I would want more global exposure.

Finally, the weirdest part is that he has no allocation to equities except for one small holding in Orix. A lot of people here are highly suspicious of equities (probably a hangover from the bubble) but I would say that not including an allocation to global low cost equities index is the biggest issue with this portfolio. Historically, over the long run, nothing even remotely compares to the growth that equities offer. This seems like a huge oversight to me. If he is concerned that equities are risky, then why has he allocated so much to corporate bonds which have a similar risk vector.

Anyway, just my 2 Yen. Who knows, his allocation may outperform over the years and he will be laughing at us naysayers.

[RetireJapan]

I'm enjoying the blog and learning some things, but the asset allocation seems insane to me too

[StockBeard]

Posting to follow. It's refreshing to have a Japanese source on the early retirement topic. The blog is a good source of information on some of the things he went through during his journey, such has applying for unemployment benefits (Hello Work?).

Agreed with the concerns about his assets allocation. It seems not much thought is put into inflation risk, or is it me just being lost in translation? Granted, inflation has been low in Japan, but couldn't that change?

In any case, I'm a bit jealous that he can live on 200'000 yen a month. With 3 young kids and a house that I haven't even started paying for, that's not in the cards for me

[TokyoWart]

He does have a strange and internaly inconsistent portfolio. He could construct a portfolio of equities with greater diversification and a dividend yield equal to or better than what he is getting from the very concentrated corporate bonds, and diversifying internationally (in equity index funds or balanced funds) could mitigate some of the inflation risk from holding only yen, fixed-income assets. It's also odd to not trust equities but have a substantial position in a single stock. I can understand his interest in REIT's because they tend to generate high income but he seems unaware of how that asset class goes through dramatic swings in valuation and not all REIT's are able to survive.

I recently read the updated version of, "Your Money or Your Life" which mentions that one of the original authors, Joe Dominguez, retired at age 31 with a portfolio of a little under $100,000 right around 1970. He invested everything in longterm US Treasuries (at much higher rates than today) and survived financially until his untimely death from cancer at age 58. In inflation-adjusted terms I would estimate Joe's portfolio income was about twice what is described in this blog.

[RetireJapan]

200,000 yen is a bit too low for me, although perhaps his wife is still working? My target range is still 250,000-400,000 a month in income, although that includes me pottering around making random money (from writing, speaking, coaching, etc.).

[Jansen]

From my understanding, he bought his high yielding corporate bonds following the Lehman shock but has mostly switched over to REITs since the following years of QE has all but eliminated high yield bonds. When his bonds mature, he's moving them over to REITs. His idea of diversification is splitting between commercials REITs and utility REITs, particularly renewable energy ones.

[Leafs_Raps]

I'm enjoying the blog and learning some things, but the asset allocation seems insane to me too

Ben you often say that you invest in mutual funds (eMaxis) and high yield stocks... If you do not mind sharing, which stocks do you hold in your portfolio?

[RetireJapan]

Ben you often say that you invest in mutual funds (eMaxis) and high yield stocks... If you do not mind sharing, which stocks do you hold in your portfolio?

I'm almost embarrassed to, as I know that I don't really have good reasons for buying these particular stocks

Right now my general rule is to buy and never sell dividend stocks (although I sold all my oil and mining stocks last year to divest from fossil fuels). This means I think about them when I buy, but then never really worry about them again afterwards.

Right now I have Japanese and US stocks:

1407 West Holdings
3407 Asahi Kasei
4980 Dexerials
6306 Nikko
6882 Sansha Electric
7201 Nissan
7722 Kokusai Keisokuki
8411 Mizuho Financial Group

AAPL Apple
PM Philip Morris
HSY Hershey
SAN Santander Bank
HSBC Hong Kong Shanghai Bank
PSO Pearson
DIS Disney
EMN Eastman Chemical
FDX Fedex
IBM International Business Machines
WSM Williams Sonoma
KO Coca Cola
SWKS Skyworks Solutions
MO Altria
PG Proctor and Gamble
T AT&T
SBUX Starbucks
TGT Target

The performance has been extremely mixed, but I have received a couple of million yen in dividends since I started investing, so planning to continue investing the bulk of our money in index funds and the rest in income-producing assets.

[Leafs_Raps]

I'm almost embarrassed to, as I know that I don't really have good reasons for buying these particular stocks

Right now my general rule is to buy and never sell dividend stocks (although I sold all my oil and mining stocks last year to divest from fossil fuels). This means I think about them when I buy, but then never really worry about them again afterwards.

Right now I have Japanese and US stocks:

1407 West Holdings
3407 Asahi Kasei
4980 Dexerials
6306 Nikko
6882 Sansha Electric
7201 Nissan
7722 Kokusai Keisokuki
8411 Mizuho Financial Group

AAPL Apple
PM Philip Morris
HSY Hershey
SAN Santander Bank
HSBC Hong Kong Shanghai Bank
PSO Pearson
DIS Disney
EMN Eastman Chemical
FDX Fedex
IBM International Business Machines
WSM Williams Sonoma
KO Coca Cola
SWKS Skyworks Solutions
MO Altria
PG Proctor and Gamble
T AT&T
SBUX Starbucks
TGT Target

The performance has been extremely mixed, but I have received a couple of million yen in dividends since I started investing, so planning to continue investing the bulk of our money in index funds and the rest in income-producing assets.
[/quote]

Thanks a lot for sharing this, Ben. I am now wondering why it seems that you have invested in more US stocks... Don't you have to pay a 30% withholding on dividends from US companies?