RetireJapan

Ditto wrote: ↑Wed Mar 28, 2018 2:16 pm

jcc wrote: ↑Wed Mar 28, 2018 4:29 am As others have said, the bogleheads advice is good but US specific.

Interesting. Boglehead's recommend a 3 fund portoflio :

Total World index
Total Domestic Index
Developed Bond Index ( your age in bonds)

Can't it be applied in Japan as well?

The problem with trying to imitate that portfolio in Japan is that the US version is similar to developed world markets (ie roughly 50% US, 50% other). If you do the same thing with Japan you end up hugely overweighted Japan and underweight everything else. This might work out well for you, or might not.

I personally prefer to stay agnostic and just buy the world with a slight overweighting in emerging markets, as I suspect they may perform better over the long term.

Yes if you followed the Bogleheads model you would be holding a really large proportion of your portfolio in Japanese stocks.

I did exactly that and am now trying to reduce my allocation to Japan.

Even though Japan is said to be really undervalued, I don't feel happy about taking a bet on it. Everybody knows about Japan's long-term problems like its debt to GDP ratio, demography, and structural problems!

Currency risks are supposed to even out over many years. If you are really worried you could buy a currency-hedged product.

Ditto wrote: ↑Wed Mar 28, 2018 2:22 pm Thank you for the link, will give it a try asap. I was looking at WealthNavi the other day but isn't the 1% fee pretty steep?

Sorry, I meant just use roboadvisors for reference rather than put your money in them. If you look around their websites you can usually find their asset allocations. All of them work on the same principle — they offer up a diversified portfolio that aims to optimise the returns for a given level of risk.

Ditto wrote: ↑Wed Mar 28, 2018 2:16 pm
I was considering building my first portfolio like this

40% Domestic for example:
ｅＭＡＸＩＳ ＴＯＰＩＸインデックス (should be reinvesting the dividends internally) or 1348 ＭＡＸＩＳトピックスＥＴＦ

The e-maxis slim funds are cheaper than the standard e-maxis. Personally, I wouldn't bother with ETFs. Reinvesting the dividends is a pain and you'll be taxed on them once your 5 years in a NISA is up.

Ditto wrote: ↑Wed Mar 28, 2018 2:16 pm 40% World
1550 ＭＡＸＩＳ海外株式 or ｅＭＡＸＩＳ 国内物価連動国債インデックス (should be reinvesting the dividends internally)
maybe some VT and VTI but the dont wanna pay much US taxes, currency exhange fees and don't think dividends are reinvested internally since they are ETFs.

ｅＭＡＸＩＳ 国内物価連動国債インデックス is a bond fund right?

For developed market stocks, the Nissei fund ＜購入・換金手数料なし＞ニッセイ 外国株式インデックスファンド＞ is one of the cheapest and most popular. E-maxis slim is also reasonable. Don't forget that these funds don't include emerging markets, so you might want to add some of those too. Again, the ｅＭＡＸＩＳ Ｓｌｉｍ 新興国株式インデックス fund is reasonable.

Ditto wrote: ↑Wed Mar 28, 2018 2:16 pm Bonds
10% domestic
ｅＭＡＸＩＳ Ｓｌｉｍ 国内債券インデックス
10% developed countries
ｅＭＡＸＩＳ Ｓｌｉｍ 先進国債券インデックス

Like Dragonash says, bond prices are going to fall with increasing interest rates. However, unlike stocks, most of the growth in bond funds comes from the yield rather than price fluctuations. This may soften the blow a bit.

With all the funds, I try to choose ones that have sustained inflows. A good idea is to select ones that are also available for iDeCo and Tsumitate NISA. They're more likely to still be around in a few years.

Ditto wrote: ↑Wed Mar 28, 2018 2:16 pm

jcc wrote: ↑Wed Mar 28, 2018 4:29 am As others have said, the bogleheads advice is good but US specific.

Interesting. Boglehead's recommend a 3 fund portoflio :

Total World index
Total Domestic Index
Developed Bond Index ( your age in bonds)

Can't it be applied in Japan as well?

Ok, so Jack Bogle(where the bogleheads name came from) basically wrote a significant chapter on international diversification in "Common sense on mutual funds". It was very america centric but it basically came down to

a) there's nothing wrong with diversifying a bit, but keep most of your money at home(in the US) because long-term returns have been consistently good
b) A significant part of say the S&P500 are huge multinationals. In effect they're already globally diversified. Because of this Bogle suggested you don't even need international diversification(assuming you're a US investor in US domiciled financial devices)

His arguments don't really bear out when you replace domestic US with domestic Japan(nor were they ever intended to as his book was written for US investors and bogleheads is maintained by US investors). The historical returns in japan are weak, investor sentiment is weak, and the bonds have abysmally low coupons.

Bond allocation is depending on how long your investment period is and how risk adverse you are. It's probably a good idea to have some because just the act of rebalancing your holdings can allow you to unemotionally time the market.

To balance it out, for stocks you have to mix and match between:

1) international stocks:
a) US only. Advantages: historically the best long-term returns, vanguard offers dirt cheap high quality ETFs. Disadvantages: double taxation, less diversification than world, currency risk,
b) World(over half of this is US). Advantages: better historic gains, more diversification. Disadvantages: double taxation, currency risk. Using low-cost US ETF's would get you triple taxed on non-us part of it.
c) Emerging markets: high risk, potentially high return, higher transaction costs

2) Domestic. Advantages: taxed only once, no currency risk(assuming you stay in Japan). Disadvantages: Historically weak returns.

40% World
ｅＭＡＸＩＳ 国内物価連動国債インデックス (should be reinvesting the dividends internally)

This doesn't look like a stock index fund? Looks like bonds attached to domestic prices(inflation adjusted jgb's?)

Thank you for the reply. Its really helpful to get a broader view and advice from more experienced investors in Japan.
After reading over 2000 pages from J.C.Bogle and others:
The little book of common sense investor.
The intelligent Investor.
Your Money or Your life.
Millioner Teacher and Millioner Expat.
Bogleheads' guide to investing.
Enough.
The 4 pillars of investing.
The simple path to wealth,

I wouldn't consider not keeping a small percentage in bonds and neither should you.

I've read all the above (and many, many more) and for the short term I'm quite happy to stay in cash instead of bonds (ie, the above allocation doesn't include the 5-10% cash position that would normally be in bonds) while looking for other possible options.

Never blindly follow advice from a book. Always think about the current environment and outlook at the time the book was written vs now, and always think about your own specific situation and goals/needs. Here's what another investor said (bolding mine):

For tax-paying investors like you and me, the picture has been far worse. During the same 47-year
period, continuous rolling of U.S. Treasury bills produced 5.7% annually. That sounds satisfactory. But
if an individual investor paid personal income taxes at a rate averaging 25%, this 5.7% return would
have yielded nothing in the way of real income. This investor’s visible income tax would have stripped
him of 1.4 points of the stated yield, and the invisible inflation tax would have devoured the remaining
4.3 points. It’s noteworthy that the implicit inflation “tax” was more than triple the explicit income tax
that our investor probably thought of as his main burden. “In God We Trust” may be imprinted on our
currency, but the hand that activates our government’s printing press has been all too human.

High interest rates, of course, can compensate purchasers for the inflation risk they face with currency-based
investments – and indeed, rates in the early 1980s did that job nicely. Current rates, however, do not come
close to offsetting the purchasing-power risk that investors assume. Right now bonds should come with a
warning label.
<SNIP>
Beyond the requirements that liquidity and regulators impose on us, we will purchase currency-related
securities only if they offer the possibility of unusual gain – either because a particular credit is
mispriced, as can occur in periodic junk-bond debacles, or because rates rise to a level that offers the
possibility of realizing substantial capital gains on high-grade bonds when rates fall. Though we’ve
exploited both opportunities in the past – and may do so again – we are now 180 degrees removed from
such prospects.

Investing is different if your lifestyle doesn't change depending on how your portfolio does - ie, if I was closer to retirement and needed my investments to live off, bonds might be an unfortunate necessity. That's not the case. If I'm looking to invest in bonds due to 'safety', I prefer cash to bonds. If I'm looking to invest in bonds for asset allocation/diversification, I would prefer some other investment vehicle over bonds.

There's no way I'd have my age (half my portfolio!) in bonds right now.