RetireJapan

The Robo Advisor seems to adjust the target volatility of its suggested portfolio depending on the customer's age, which you also input along with the various risk profiling questions. So I got it to suggest a portfolio at the highest risk tolerance portfolio again but this time for someone 20 years younger than me, and it came up with this:

Deep Blue wrote: ↑Wed Apr 24, 2024 12:48 pm JGB'S = return free risk. Upside is meagre, downside is massive.

Any sensibile long term investment portfolio is zero weighted in JGBs.

beanhead wrote: ↑Wed Apr 24, 2024 12:15 pm As others have said, in a tax-advantaged account you should invest in products that will grow.
This involves taking some risk.
If you are 58 or 60 or something then I understand your reluctance.
If not, I recommend you keep reading about long-term investing (Boglehead method/ low-cost mutual funds) and start investing in equity funds.

Investing in equities obviously involves some risk. So too does choosing only overly conservative products (cash, bonds etc), as these may not keep up with inflation in the future. You should also consider this possibility.

Why Retirees Need a Balanced Portfolio
Higher Yields Point Toward Value of Balance
And indeed, when we look at our own research, which takes a forward-looking view of what would be safe withdrawal amounts, we come to a similar conclusion. So, over those very short time horizons, so for older retirees, for example, we can see that actually, based on our research, based on our Monte Carlo simulations, they’re actually better off with more-conservative-tilted portfolios, so portfolios that have as little as 30% or even 20% in equities. Whereas people who are retiring with more typical time horizons, so people retiring with 25- or 30-year time horizons, are better off with portfolios that are balanced in nature. The 60/40, the 50/50, even the 40/60 portfolio tends to support the highest safe withdrawal amount. And the reason is that even though the expected return on stocks is much better, and that cuts across stocks of all types, what we see is that the variability of bond returns is much more predictable, much more reliable, and that’s what we’re seeing in the right-hand column here, where we’re looking at the expected standard deviation of returns for each of these asset classes.

Why Retirees Need a Balanced Portfolio
The right retirement asset allocation can help enlarge your lifetime withdrawals.
So, in a simple Bucket setup, we’re setting aside one or two years’ worth of portfolio withdrawals in cash investments. We’re not taking any risks with this portion of the portfolio. We are subject to inflation risk, but we’re not overallocating to it. So, we’re just holding a couple of years’ worth of portfolio withdrawals. And then, with the rest of the portfolio, we’re just stepping out a little bit on the risk spectrum. So, with Bucket 2, we have a high-quality fixed-income portfolio mainly, and I would stairstep that portion of the portfolio from very conservative, high-quality short-term bond funds to holdings that are a little bit more aggressive. So, there I would consider holding intermediate-term bonds, a component of Treasury Inflation-Protected Securities. But the idea here, the core idea here is that with Bucket 1, your cash bucket, and Bucket 2, which is your high-quality fixed-income piece, you could have Armageddon with the stock market. You could have very terrible performance with your stock portfolio, and you would still have that 10-year runway of fairly safe returning assets that you could spend through if you needed to.
https://www.morningstar.com/retirement/ ... -portfolio

Tsumitate Wrestler wrote: ↑Wed Apr 24, 2024 2:11 pm

Deep Blue wrote: ↑Wed Apr 24, 2024 12:48 pm JGB'S = return free risk. Upside is meagre, downside is massive.

Any sensibile long term investment portfolio is zero weighted in JGBs.

I think "cash/cashlike positions" would do well in an Inflation indexed JGB bond fund. Better than a bank account.
https://www.rakuten-sec.co.jp/web/fund ... 90C0000HW0

ChapInTokyo wrote: ↑Wed Apr 24, 2024 2:15 pm
Next year, I'll start drawing my pension, so I do need to reduce volatility of the portfolio as a whole. But according to Morningstar's Christine Benz, a balanced portfolio of 40:60 or 50:50 or 60:40 stocks and bonds are shown to support the highest safe withdrawal rate, so I'll definitely keep a bunch of low cost equity in there.

beanhead wrote: ↑Thu Apr 25, 2024 10:17 am

ChapInTokyo wrote: ↑Wed Apr 24, 2024 2:15 pm
Next year, I'll start drawing my pension, so I do need to reduce volatility of the portfolio as a whole. But according to Morningstar's Christine Benz, a balanced portfolio of 40:60 or 50:50 or 60:40 stocks and bonds are shown to support the highest safe withdrawal rate, so I'll definitely keep a bunch of low cost equity in there.

OK, that explains it then.
Returns on cash and cash-like products in Japan are almost non-existent. You cannot get 5% return on anything that has no risk, as far as I know.

ChapInTokyo wrote: ↑Thu Apr 25, 2024 10:57 amI will still probabably include fixed income assets in my portfolio and JGBs will probably have a place there because of being able to not worry about the exchange rate fluctuations on that front…