RetireJapan

Chizakura wrote: ↑Wed Mar 27, 2024 10:21 am
You can also mix them and use one in NISA and one in ideco. (better to use topix in ideco and all-world in nisa)



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In short: because of the progress tax, you want to try to "flatten" out your returns in yen. And that is harder to if you deal with foreign currencies.

Also, in NISA, you can keep the money and have it growing if you don't need it immediately when you retire, so you can flatten it out in a more custom way.

Remember, Japan is only 5-6% of the Global stock market. There is little benefit to a home country bias in Japan in my opinion for the long term investor.

IDeco also pays out in many ways. A. Lump sum, B. Pension, C Mix. So you can pick the best strategy for yourself. I would not worry about currency fluctuations over the course of a 30+ year investment horizon.

sutebayashi wrote: ↑Wed Mar 27, 2024 1:20 pm

Chizakura wrote: ↑Tue Mar 26, 2024 7:05 pm The all-world etfs have a currency risk. If the yen grows strong then you will lose purchase power.

In my view, Japanese assets have a currency risk too - the yen itself. If the yen continues to weaken, then purchasing power may be lost (depending on whether Japanese stocks rise enough to compensate).

Right. It's important to undertand that these are two different risks. If the yen gets super weak but you only consume local products then it won't have an impact on you. However, if you consume a lot of foreign products and travel a lot, it will impact you.

So if you think about it, when retired, in a typical year, what and how much do you consume and how is that impafted by local and foreign markets. I think most basic products and services (except probably some food-related stuff) are local. Investing in e.g. TOPIX contains a smaller risk. That's the idea.

IDeco also pays out in many ways. A. Lump sum, B. Pension, C Mix. So you can pick the best strategy for yourself. I would not worry about currency fluctuations over the course of a 30+ year investment horizon.

If you invest in an all-world and the USD gets very weak (let's say, within a single year, for whatever reason) then this can be a problem, especially if you rely on ideco and can't just postpone using it for payout.
At the same time, if the yen grows very strong within a short time, you will obviously benefit, but your tax burden will grow progressively as well.

Chizakura wrote: ↑Thu Mar 28, 2024 6:17 am

IDeco also pays out in many ways. A. Lump sum, B. Pension, C Mix. So you can pick the best strategy for yourself. I would not worry about currency fluctuations over the course of a 30+ year investment horizon.

If you invest in an all-world and the USD gets very weak (let's say, within a single year, for whatever reason) then this can be a problem, especially if you rely on ideco and can't just postpone using it for payout.
At the same time, if the yen grows very strong within a short time, you will obviously benefit, but your tax burden will grow progressively as well.

You can rebalance at anytime within your ideco without penalty, so this is not a big concern.

Someone who was risk-adverse, would be moving away from equities as they approach retirement. Especially if they were depending on that income.

Tsumitate Wrestler wrote: ↑Thu Mar 28, 2024 8:51 am

Chizakura wrote: ↑Thu Mar 28, 2024 6:17 am

IDeco also pays out in many ways. A. Lump sum, B. Pension, C Mix. So you can pick the best strategy for yourself. I would not worry about currency fluctuations over the course of a 30+ year investment horizon.

If you invest in an all-world and the USD gets very weak (let's say, within a single year, for whatever reason) then this can be a problem, especially if you rely on ideco and can't just postpone using it for payout.
At the same time, if the yen grows very strong within a short time, you will obviously benefit, but your tax burden will grow progressively as well.

You can rebalance at anytime within your ideco without penalty, so this is not a big concern.

How would that solve the problem? The valuation and taxation is always in yen. If you have 100 USD all-world which is worth 15k YEN and you sell half of it and buy some TOPIX fund, your assets are still worth 15k YEN.

Someone who was risk-adverse, would be moving away from equities as they approach retirement. Especially if they were depending on that income.

Yes, that's very true. That's the reason why I would recommend to stop investing into stocks or other kind of volatile assets and switch to bonds or other non-volatile assets the closer retirement comes. However, OP specifically said "World fund developed countries seems to come up a lot. Still good? What about Japanese stocks?" so In answered in that context.

Chizakura wrote: ↑Wed Mar 27, 2024 10:21 am
No, it's not about the risk, it's about the currency. Ideco has a tax free allowance. There are then three cases: yen is getting 1) much stronger, 2) much weaker 3) stays the same, compared to the other currencies that impact your investment (which for an all-world ETF would be dominantly USD).

[...]

Also, if you travel a lot or spend money outside of Japan, then if Japan doesn't do well and you are invested in only TOPIX or similar, your purchase power would go down.

I'm replying days latter, but I just wanted to say "thank you" for your detailed answer.

Chizakura wrote: ↑Thu Mar 28, 2024 6:14 am
So if you think about it, when retired, in a typical year, what and how much do you consume and how is that impafted by local and foreign markets. I think most basic products and services (except probably some food-related stuff) are local. Investing in e.g. TOPIX contains a smaller risk. That's the idea.

Remember that Japan imports the majority of its food and energy. Even locally produced food will be transported using imported petrol, packaged using energy produced by burning imported oil coal or gas…

Bread? 90% of wheat is imported.. etc etc

Need a new fridge? The steel inside is made from iron ore imported from Australian or Brazil.

Gas and electricity bills - obviously cost more with the weak yen etc.

Sadly Japan is very resource poor and highly dependent on imports for the things needed for a modern life.

Deep Blue wrote: ↑Thu Apr 04, 2024 7:38 am

Chizakura wrote: ↑Thu Mar 28, 2024 6:14 am
So if you think about it, when retired, in a typical year, what and how much do you consume and how is that impafted by local and foreign markets. I think most basic products and services (except probably some food-related stuff) are local. Investing in e.g. TOPIX contains a smaller risk. That's the idea.

Remember that Japan imports the majority of its food and energy. Even locally produced food will be transported using imported petrol, packaged using energy produced by burning imported oil coal or gas…
(...)
Sadly Japan is very resource poor and highly dependent on imports for the things needed for a modern life.

Yeah, those are good points and should be considered for investing and planning, especially with focus on retirement.

Most people talk about which stocks/funds to pick etc. But actually, the above is much more important and should be clarified first, and then the investment decisions follow.