RetireJapan

Kanto wrote: ↑Mon Nov 30, 2020 1:23 am

Tony wrote: ↑Sun Nov 29, 2020 9:17 pm I have no problem buying 10-year floating 個人向け国債

The Boglehead approach does not recommend floating bond rates FYI.

I'm not sure Bogleheads would recommend putting your whole bond allocation into unhedged foreign bonds either.

I don't buy individual bonds myself, but what's the problem with these Japanese floating rate bonds as opposed to fixed rate ones? The floor on the yield is the same as 5 year fixed-rate JGBs, but the floating yield gives you some protection against rising rates.

fools_gold wrote: ↑Mon Nov 30, 2020 2:18 pm

Kanto wrote: ↑Mon Nov 30, 2020 1:23 am

Tony wrote: ↑Sun Nov 29, 2020 9:17 pm I have no problem buying 10-year floating 個人向け国債

The Boglehead approach does not recommend floating bond rates FYI.

I'm not sure Bogleheads would recommend putting your whole bond allocation into unhedged foreign bonds either.

I don't buy individual bonds myself, but what's the problem with these Japanese floating rate bonds as opposed to fixed rate ones? The floor on the yield is the same as 5 year fixed-rate JGBs, but the floating yield gives you some protection against rising rates.

It seems the arguments are more nuanced than I thought. The argument (strictly from the Boglehead point of view) I was familiar with is that bonds in this environment are a hedge against risk. Therefore a floating rate does not make sense. Short term Treasurys and AAA\AAs makes more sense.

https://www.bogleheads.org/wiki/Floating_rate_bonds

As far as hedging goes, the research does not really make it clear. Strong arguments both ways.

I split the differences now.
50% -ｅＭＡＸＩＳ Ｓｌｉｍ 先進国債券インデックス (Unhedged)
50% - 楽天・全世界債券インデックス（為替ヘッジ）ファンド (Hedged)

...............

Mind you I am at 90% equities and 10% bonds in my early 30s. My wife is 80% Equities and 20% bonds.

It seems the majority of retail investors are ignoring fixed income in this Bull market, K shaped recovery of ours. It is hard to blame them with the Feds recent stance on rates. Most Advanced economies are returning near 0% on sovereign debt.

I am reluctant to change my allocations.... Thoughts?

10-year floating 個人向け国債 pose almost no risk (extremely unlikely the government is going to default on it's bonds), and provide some protection against inflation, even selling off before maturity only incurs a penalty on interest earned, so again, no real risk. Of course my bond allocation is not totally JGBs (in fact less than 50% of it is), I was just saying that a lot of people here complain that bonds/bond funds don't make much money, and are looking for ones that do, whereas I find bonds aren't my investment vehicle, they are the foundation of my investments.

Tony wrote: ↑Mon Nov 30, 2020 9:11 pm 10-year floating 個人向け国債 pose almost no risk (extremely unlikely the government is going to default on it's bonds), and provide some protection against inflation, even selling off before maturity only incurs a penalty on interest earned, so again, no real risk. Of course my bond allocation is not totally JGBs (in fact less than 50% of it is), I was just saying that a lot of people here complain that bonds/bond funds don't make much money, and are looking for ones that do, whereas I find bonds aren't my investment vehicle, they are the foundation of my investments.

Would you mind sharing the rest of your fixed-income portfolio? I am curious about what a boglehead approach looks like in Japan.

I tried my best with the following funds in my iDeco/Nisa and taxable

楽天・全世界株式インデックス・ファンド（楽天・バンガード・ファンド（全世界株式)
ｅＭＡＸＩＳ Ｓｌｉｍ 全世界株式（オール・カントリー)
ｅＭＡＸＩＳ Ｓｌｉｍ 先進国債券インデックス

I have to admit I am a naughty boy and don't have any bonds

Kanto wrote: ↑Mon Nov 30, 2020 2:46 pm It seems the arguments are more nuanced than I thought. The argument (strictly from the Boglehead point of view) I was familiar with is that bonds in this environment are a hedge against risk. Therefore a floating rate does not make sense. Short term Treasurys and AAA\AAs makes more sense.

https://www.bogleheads.org/wiki/Floating_rate_bonds

That article seems to mostly talk about bonds issued by financial institutions. These ones are government issued and the minimum yield is guaranteed. The only downside I can see is that if yields remain low you lose out compared to 10 year fixed rate bonds (0.05% vs 0.1%). However, if rates rise they offer some protection. Personally, I can get 0.3% on cash savings through my workplace scheme so I don't bother holding individual JGBs.

Kanto wrote: ↑Mon Nov 30, 2020 2:46 pm As far as hedging goes, the research does not really make it clear. Strong arguments both ways.

I split the differences now.
50% -ｅＭＡＸＩＳ Ｓｌｉｍ 先進国債券インデックス (Unhedged)
50% - 楽天・全世界債券インデックス（為替ヘッジ）ファンド (Hedged)

I think it's prudent to keep some of your money in either hedged or domestic bonds. This 50/50 split sounds like a reasonable idea to me.