RetireJapan

Posted: **Wed Oct 25, 2023 1:55 am**

alberto wrote: ↑Wed Oct 25, 2023 1:41 am If we are buying MSCI-World, that means we are buying foreign currency (mostly USD) with JPY, so you can say "I cannot know what will happen with the exchange rate", but in the end you have to make a choice: unhedged or hedged. The previous statement does not imply unhedged. Actually, if you really want to isolate your investment from the exchange rates, hedged would be the choice. By buying unhedged, you are not only investing in MSCI-World, but also speculating with the JPY/USD, even though it's unintentionally, and that has a huge effect on your investment, as you can see in the chart I shared yesterday.

Which hedged fund would you buy instead of eMaxis Slim?

Posted: **Wed Oct 25, 2023 5:19 am**

RetireJapan wrote: ↑Wed Oct 25, 2023 1:55 am
alberto wrote: ↑Wed Oct 25, 2023 1:41 am If we are buying MSCI-World, that means we are buying foreign currency (mostly USD) with JPY, so you can say "I cannot know what will happen with the exchange rate", but in the end you have to make a choice: unhedged or hedged. The previous statement does not imply unhedged. Actually, if you really want to isolate your investment from the exchange rates, hedged would be the choice. By buying unhedged, you are not only investing in MSCI-World, but also speculating with the JPY/USD, even though it's unintentionally, and that has a huge effect on your investment, as you can see in the chart I shared yesterday.
Which hedged fund would you buy instead of eMaxis Slim?

If one were interested in hedged funds, then presumably they would not want to keep that position forever, they would eventually look to move to a similar non-hedged position.

You would probably want your Emaxis Slim (Unhedged) in your NISA and Ideco.

In your taxable, you could probably look at ETFs over Mutual funds. And you would find better offerings with S&P 500 funds over All-World Funds. (More liquidity, better tracking, better fees).

Specifically, BRJ ishares S and P 500 - Hedged ETF (TYO 2563)
https://minkabu.jp/stock/2563

.....

This is not financial advice obviously. I am very neutral on this play.

Posted: **Wed Oct 25, 2023 7:57 am**

I have started buying the one I posted the chart yesterday: https://nextfunds.jp/en/lineup/2513/

It's not a fund, but an ETF, so there are some dividends, which is not optimum, but the fee is 0.187%, which is reasonable.

Posted: **Wed Oct 25, 2023 8:13 am**

alberto wrote: ↑Wed Oct 25, 2023 7:57 am I have started buying the one I posted the chart yesterday: https://nextfunds.jp/en/lineup/2513/

It's not a fund, but an ETF, so there are some dividends, which is not optimum, but the fee is 0.187%, which is reasonable.

You linked and unhedged fund. Was that your intention?

Also it is expensive.....TYO2563 is 0.077%

Posted: **Wed Oct 25, 2023 8:34 am**

Your link says it's unhedged MSCI Kokusai so I don't understand all the talk about currency risk. So you just don't want mutual funds?
eMaxis has a MSCI Kokusai ETF too and its management fee is 0.165%.

https://www.am.mufg.jp/fund/181550.html

Posted: **Wed Oct 25, 2023 8:42 am**

Sorry, my mistake. This is the correct link: https://nextfunds.jp/en/lineup/2514/

These two ETFs are the ones I compared in yesterday's chart.

Posted: **Wed Oct 25, 2023 9:01 am**

sutebayashi wrote: ↑Tue Oct 24, 2023 11:50 pm So the dynamic of foreign central banks tightening, while the BoJ continues to loosen, will continue - this is my assumption. And even if the foreign banks become a little less tight, the BOJ will still be pumping new money into the system.

This is not correct though. The Bank of Japan is not loosening monetary policy. It has been tightening (relaxing YCC boundaries) and expected to tighten further. JGB yields are up across the entire curve, reflecting the markets widespread assumptions that the policy rate will rise (NIRP will end) and YCC will be loosened or abandoned.

Posted: **Wed Oct 25, 2023 9:08 am**

alberto wrote: ↑Wed Oct 25, 2023 1:41 am . By buying unhedged, you are not only investing in MSCI-World, but also speculating with the JPY/USD, even though it's unintentionally, and that has a huge effect on your investment, as you can see in the chart I shared yesterday.

The opposite is true. You are not taking a view on the JPY if you continue buying unhedged funds. You are accepting the risks which is pretty sensible as a long term investor (which all equity investors should be). Long run equity returns should absolutely dominate long run currency moves.

If you buy a hedged fund, you are paying the fund manager (albeit a small amount) to hedge your forex risk for you. You are taking an explict forex view (expecting JPY strength) and actively trying to shut it down. This may or may not work out, but it is most definitely taking an active view and speculating.

Posted: **Wed Oct 25, 2023 9:21 am**

Well, I see it differently, even using your own words. By buying a hedged ETF (which cost is negligible compared to unhedged in the one I just shared), you avoid the JPY/USD currency volatility. This volatility had a HUGE effect in the last 2 years, for good this time, but it could also be for bad (and it may if the rate returns to the mean eventually). You call "speculate" to avoid that volatility, I'd say it's just the opposite, but it doesn't really matter what words we use as long as we agree on the effect of what we're doing, and the effect is that with a unhedged ETF you are investing in the index and additionally surfing the exchange rate volatility, and with the hedged ETF you do the first thing and avoid the second.

Posted: **Wed Oct 25, 2023 9:47 am**

alberto wrote: ↑Wed Oct 25, 2023 9:21 am Well, I see it differently, even using your own words. By buying a hedged ETF (which cost is negligible compared to unhedged in the one I just shared), you avoid the JPY/USD currency volatility. This volatility had a HUGE effect in the last 2 years, for good this time, but it could also be for bad (and it may if the rate returns to the mean eventually). You call "speculate" to avoid that volatility, I'd say it's just the opposite, but it doesn't really matter what words we use as long as we agree on the effect of what we're doing, and the effect is that with a unhedged ETF you are investing in the index and additionally surfing the exchange rate volatility, and with the hedged ETF you do the first thing and avoid the second.

A hedged fund does not protect you from volatility. It helps hedge against losses that might occur if the yen appreciates.

It also often does so with currency forward contracts that anyone can go out and buy themselves from a standard bank like MUFJ.

It's a bet....in one direction only.

RetireJapan

Does it make sense to continue with the same strategy with this JPY/USD rate?

Re: Does it make sense to continue with the same strategy with this JPY/USD rate?

Re: Does it make sense to continue with the same strategy with this JPY/USD rate?

Re: Does it make sense to continue with the same strategy with this JPY/USD rate?

Re: Does it make sense to continue with the same strategy with this JPY/USD rate?

Re: Does it make sense to continue with the same strategy with this JPY/USD rate?

Re: Does it make sense to continue with the same strategy with this JPY/USD rate?

Re: Does it make sense to continue with the same strategy with this JPY/USD rate?

Re: Does it make sense to continue with the same strategy with this JPY/USD rate?

Re: Does it make sense to continue with the same strategy with this JPY/USD rate?

Re: Does it make sense to continue with the same strategy with this JPY/USD rate?