RetireJapan

TokyoBoglehead wrote: ↑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.

northSaver wrote: ↑Wed Apr 12, 2023 3:23 am

TokyoBoglehead wrote: ↑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.

I've finally had some time to look into this, and can confirm that the data they are using seems legitimate. I specifically compared two asset classes (S&P500 index and Gold) priced in USD and JPY over various time periods between 6 months and 20 years up to Feb 2023. The results don't exactly match my charts because I don't know exactly which funds they're using, particularly in the "米国株" category. But there are clear differences between USD and JPY denominated returns, and the outputs on their site reflect the JPY denominated returns, not the USD ones. That's a relief! I can now trust their data much more, and feel this is a valuable tool for investors in Japan.

As a side note, it seems that the S&P has increased about 350% in USD terms over the last 20 years (until Feb), but about 700% in JPY terms! This is a real eye-opener, and makes me wonder when JPY-based returns of foreign assets will start to drop. Fortunately I have a healthy stash of Japanese stock index funds - and continue to buy some every month in iDeCo - so I'm (hopefully) pretty diversified in that regard.

ToushiTime wrote: ↑Wed Apr 12, 2023 7:14 am I don't want to put everything in equity mutual funds, so what's wrong with holding US Treasury bonds for 10 or 20 years as an alternative to cash?
In the long-run I think the dollar will be stronger than the yen, given the structural factors in both nations' economies.

northSaver wrote: ↑Wed Apr 12, 2023 8:37 am

ToushiTime wrote: ↑Wed Apr 12, 2023 7:14 am I don't want to put everything in equity mutual funds, so what's wrong with holding US Treasury bonds for 10 or 20 years as an alternative to cash?
In the long-run I think the dollar will be stronger than the yen, given the structural factors in both nations' economies.

Bonds are not really an alternative to cash, because bond fund prices fluctuate and you may not get back what you put in. Also, if you buy yen-denominated US bonds then you are exposing yourself to exchange rate risk. Over 10 to 20 years you should be OK, but it's something to bear in mind.

If, on the other hand, you're talking about buying bonds direct from the Treasury with USD, then you will definitely get back more than you put in when they mature, but you'll probably have trouble cashing them in early. Again, not an alternative to cash.

Very short term bonds are more like cash, and if you have some USD lying around then I recommend an ETF like SGOV. The fund price hardly changes and it's paying nice dividends at the moment.

Only Americans can buy from the Treasury Directly (or those foreigners in the US with SS #s).

Buying now, in Yen, would be a risky move in my opinion. Who wants to take risk on with government bonds....?

ToushiTime wrote: ↑Wed Apr 12, 2023 9:25 am

Only Americans can buy from the Treasury Directly (or those foreigners in the US with SS #s).

Instead of that, any nationality can buy already issued Treasury Bonds via a Japanese brokerage, correct?
That is what I did and am thinking of doing again.

ETFs have fees, and the dividends from US-domiciled ETFs are automatically taxed at 10%. You can claim this back and pay the proper Japanese tax later though.

ToushiTime wrote: ↑Wed Apr 12, 2023 9:25 am

Only Americans can buy from the Treasury Directly (or those foreigners in the US with SS #s).

Instead of that, any nationality can buy already issued Treasury Bonds via a Japanese brokerage, correct?
That is what I did and am thinking of doing again.

Buying now, in Yen, would be a risky move in my opinion. Who wants to take risk on with government bonds....?

Are US Treasuries that risky? Maybe I should ask after the debt-ceiling vote and the presidential election, but barring a major political incident in the States or world war, in which case we are all screwed, I tentatively suggest that it is not a bad option.

Do you mean there is a significant risk of the yen appreciating against the dollar over the next 10-20 years?

I can imagine Japanese rates coming up if/when inflation really takes off here, so the yen could easily strengthen in the near term, but the yen isn't the safe haven it used to be, and the long-term economic outlook for Japan isn't that great, given all the usual reasons.