RetireJapan

Posted: **Sun Mar 05, 2023 12:59 am**

beanhead wrote: ↑Sat Mar 04, 2023 11:28 pm
TokyoBoglehead wrote: ↑Fri Mar 03, 2023 12:18 pm
beanhead wrote: ↑Fri Mar 03, 2023 9:46 am

Which do you think is less likely to lose value: US-denominated bonds or just cash in the bank (JPY)?
Are you asking me to predict currency movement of the yen? I cannot. That is exactly the point and where the risk comes from with foreign bond investments.

Understand that your crystal ball is not so accurate
My question was, what is the alternative if we want some 'safe' cash or cash-like funds in the portfolio? There are risks to holding cash, too.

Let's say you have a decent $1M/130M JPY saved for your retirement. Boglehead theory would say that perhaps 40% should be in bonds. For a 20 or 30 year retirement period, if we keep cash instead we have obvious inflation risk.
You have pointed out that there are currency risks to US-based bond funds. And the JPY bonds and bond funds have 0 return, basically.

So, what is the sensible ballast for a conservative investor?

Risk free (basically)
.........................
1. Cash
2. Japanese Government Bonds (preferably when banks offer bonuses and incentives for JGBs.
3.Term Deposits
........................

Risk on strategies

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

1. High quality yen denominated Japanese bonds (Hard for retail to access).
2. Foreign currency term deposits
3. Developed Country sovereign bonds unhedged
4. Developed Country sovereign bonds hedged

Posted: **Sun Mar 05, 2023 2:07 am**

beanhead wrote: ↑Sat Mar 04, 2023 11:28 pm Let's say you have a decent $1M/130M JPY saved for your retirement. Boglehead theory would say that perhaps 40% should be in bonds. For a 20 or 30 year retirement period, if we keep cash instead we have obvious inflation risk.
You have pointed out that there are currency risks to US-based bond funds. And the JPY bonds and bond funds have 0 return, basically.

So, what is the sensible ballast for a conservative investor?

We have 90-10 in stocks/bonds. Planning to keep working for now, will build up a large cash fund before we stop. But my impression is the growth in stocks should be enough to fund our lifestyle if we continue to oversave.

Not sure what I would do if we were closer to the line (ie borderline having enough savings/investments). Probably keep working.

Posted: **Sun Mar 05, 2023 12:54 pm**

On the subject of including foreign bonds in your portfolio, does anyone here use myindex.jp to see how their portfolios have performed in the past 20 years? I used it a few years ago to help construct my All Weather-based iDeCo portfolio. At the time it was the best performing for the least risk. I've just checked it again and it has returned 6.8% annually over the last 20 years, with a sharp ratio of 0.68. Not bad! This assumes monthly rebalancing and zero fees, so in practice the return has been a bit less.

The problem is which data is it using? There's a section near the bottom about the data, and it seems to be using as much as it can within each asset class rather than recognised funds. The assets are all priced in yen, with foreign assets converted to yen. I would hope that they are converted at historical exchange rates when analysing the portfolio over the past 20 years, but that point isn't made clear. I wonder if we can trust this simulator to analyse portfolios containing foreign assets that are priced in yen?

Also, TokyoBoglehead's wariness of exchange rates has made me think that I need to revisit my retirement plans and test them with worst-case exchange rates. For example, I've been using GBP.JPY=150 to convert UK pensions into yen for retirement forecasting. In the last 30 years it's been as low as 120 and as high as 250. Will it go even lower than 120 in the next 30 years? How low can it go I wonder? No one knows, but if we can live off UK income at a rate of 100, for instance, then we should be OK.
The same goes for those expecting US income in retirement. In the last 30 years USD.JPY has been in a range of about 80 to 150. Better choose 80 for retirement forecasting, I reckon.
The rates will probably (hopefully) be higher than these worst-case ones for most of our retirement, which just means we'll get more income than we planned for.

Posted: **Mon Mar 06, 2023 12:10 am**

northSaver wrote: ↑Sun Mar 05, 2023 12:54 pm On the subject of including foreign bonds in your portfolio, does anyone here use myindex.jp to see how their portfolios have performed in the past 20 years? I used it a few years ago to help construct my All Weather-based iDeCo portfolio. At the time it was the best performing for the least risk. I've just checked it again and it has returned 6.8% annually over the last 20 years, with a sharp ratio of 0.68. Not bad! This assumes monthly rebalancing and zero fees, so in practice the return has been a bit less.

The problem is which data is it using? There's a section near the bottom about the data, and it seems to be using as much as it can within each asset class rather than recognised funds. The assets are all priced in yen, with foreign assets converted to yen. I would hope that they are converted at historical exchange rates when analysing the portfolio over the past 20 years, but that point isn't made clear. I wonder if we can trust this simulator to analyse portfolios containing foreign assets that are priced in yen?

Also, TokyoBoglehead's wariness of exchange rates has made me think that I need to revisit my retirement plans and test them with worst-case exchange rates. For example, I've been using GBP.JPY=150 to convert UK pensions into yen for retirement forecasting. In the last 30 years it's been as low as 120 and as high as 250. Will it go even lower than 120 in the next 30 years? How low can it go I wonder? No one knows, but if we can live off UK income at a rate of 100, for instance, then we should be OK.
The same goes for those expecting US income in retirement. In the last 30 years USD.JPY has been in a range of about 80 to 150. Better choose 80 for retirement forecasting, I reckon.
The rates will probably (hopefully) be higher than these worst-case ones for most of our retirement, which just means we'll get more income than we planned for.

The website states " 円ベース "当サイトにて独自に円換算" for many indexes, so I feel they are not using historic data. But, I cannot be sure I understand the exact phrasing.

It should be easy to tell, compare dramatic periods of dollar/yen movement to a few of the USD index trackers and finally yen denomined index trackers and see if the movement is reflect.

Posted: **Wed Mar 08, 2023 11:35 pm**

Thanks, that link was useful.
I read it after already abandoning my idea to buy US Treasuries, but it reassured me that I had done the right thing.
I have some exposure to foreign bonds via passive mutual funds (trusts) instead, which is enough for my needs.
My aim was mostly to increase my investment in the US economy and dollar but I can do that for less money through unhedged passive equity funds over the long-term instead.

Posted: **Sat Mar 11, 2023 9:18 am**

RetireJapan wrote: ↑Sun Mar 05, 2023 2:07 am ... will build up a large cash fund before we stop.

Is there a fuller discussion on this somewhere? If I was approaching retirement, the last thing I would be doing is hoarding cash if I'm down for a x% SWR. Not that I think I'm right; I just don't know any different. Could you explain a little bit your rationale for building a large cash fund and how you would potentially use it? Keeping it as a buffer for a stock market crash would seem unnecessary because that's 'built in' to the SWR.

Posted: **Sat Mar 11, 2023 9:29 am**

banders wrote: ↑Sat Mar 11, 2023 9:18 am
RetireJapan wrote: ↑Sun Mar 05, 2023 2:07 am ... will build up a large cash fund before we stop.
Is there a fuller discussion on this somewhere? If I was approaching retirement, the last thing I would be doing is hoarding cash if I'm down for a x% SWR. Not that I think I'm right; I just don't know any different. Could you explain a little bit your rationale for building a large cash fund and how you would potentially use it? Keeping it as a buffer for a stock market crash would seem unnecessary because that's 'built in' to the SWR.

It's a variation on the bucket strategy (just without a medium term bond bucket). Now that I am 'retired' from formal work, having cash (I kept my retirement bonus and just put it in the bank) is nice, and feels different/easier/safer to/than having investments. It can also kind of substitute for bonds in a stock/bond allocation.

I don't really believe in SWRs, but rather see them as a convenient way to guesstimate things. In practice we will have our cash fund, and sell investments periodically to top up the cash fund. I guess the cash fund could be used to buy things during a stock crash too.

It seems like we're going to end up with quite a bit more money than we need, so I am not too worried about optimizing things. Right now hoping our portfolio will reach escape velocity (ie will grow faster than we can spend it). We'll see how things are looking in a few years' time.

I think the most important thing for me is that this is likely to be an ongoing process that we figure out as we go along rather than a fixed plan that we stick to.

Posted: **Sat Mar 11, 2023 2:56 pm**

adamu wrote: ↑Sat Mar 04, 2023 2:30 am
northSaver wrote: ↑Sat Mar 04, 2023 12:45 am ＳＢＩ・全世界株式インデックス・ファンド
I can't discuss bonds, but since you already have eMaxis Slim, I would prefer all country (or just upping your existing allocations) over this, due to the triple tax reasons mentioned on the wiki. Might have some overlap with ニッセイ外国株式インデックスファンド too?

That wiki says the triple tax applies to 楽天・全世界株式インデックス・ファンド
Would it also apply to this 楽天・全米株式インデックス・ファンド ? https://www.rakuten-sec.co.jp/web/fund/ ... 90C000FHD2
It is not in the list on the Wiki but I suspect it might be one of those funds.

* does anyone know what I should look for in the investment prospectus 目論見書 to tell if it is such a fund?

Posted: **Sat Mar 11, 2023 3:27 pm**

ToushiTime wrote: ↑Sat Mar 11, 2023 2:56 pm
That wiki says the triple tax applies to 楽天・全世界株式インデックス・ファンド
Would it also apply to this 楽天・全米株式インデックス・ファンド ? https://www.rakuten-sec.co.jp/web/fund/ ... 90C000FHD2
It is not in the list on the Wiki but I suspect it might be one of those funds.

* does anyone know what I should look for in the investment prospectus 目論見書 to tell if it is such a fund?

Yes, it also applies to that fund. Any fund which mentions Vanguard is wrapping up the Vanguard fund.
If you are thinking about NISA the eMaxis Slim funds are available.

If iDeCo with Rakuten there isn't a direct alternative but there are other low-cost alternate funds which have been discussed here on the iDeCo forum.
I buy the Tawara No Load developed country, for example.

Posted: **Sun Mar 12, 2023 2:19 am**

Thanks.

I also have ＳＢＩ・新興国株式インデックス・ファンド(雪だるま（新興国株式）, which I think wraps up a US Schwab fund, similarly to what the SBI Whole World Index fund in that Wiki list does.

I stopped buying the the 楽天・全米株式インデックス・ファンド(楽天・VTI) , and switched toｅＭＡＸＩＳＳｌｉｍ米国株式（Ｓ＆Ｐ５００）

RetireJapan

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