RetireJapan

Posted: **Mon Aug 14, 2023 5:51 am**

I wonder what this thread would be titled if someone were to just read the last few pages...

Posted: **Mon Aug 14, 2023 6:36 am**

Re: Gulliver - Nice job

In using MSCI World returns, I was just trying to using a broad an index as possible… we can all predict what’s happened in the past and my experience is that I’m rubbish at market timing and trying to pick this region over this region invariably results in subpar returns (for me).

So rather than trying to pick US vs Europe or Japan vs China or tech vs healthcare or whatever I just slam it all in broad market indexes and accept average equity returns…. In the secure belief these will beat cash, bonds and gold over the very long term.

Posted: **Mon Aug 14, 2023 6:40 am**

captainspoke wrote: ↑Mon Aug 14, 2023 5:51 am I wonder what this thread would be titled if someone were to just read the last few pages...

Yeah, sorry very off-topic, but I couldn’t resist.
Don’t follow my lead please.

Posted: **Mon Aug 14, 2023 1:56 pm**

Deep Blue wrote: ↑Mon Aug 14, 2023 6:36 am Re: Gulliver - Nice job

In using MSCI World returns, I was just trying to using a broad an index as possible… we can all predict what’s happened in the past and my experience is that I’m rubbish at market timing and trying to pick this region over this region invariably results in subpar returns (for me).

So rather than trying to pick US vs Europe or Japan vs China or tech vs healthcare or whatever I just slam it all in broad market indexes and accept average equity returns…. In the secure belief these will beat cash, bonds and gold over the very long term.

Yes this is an important point. Anyone who argues against internationally diversifying stocks just because the USA has done well in recent history needs to watch this: https://www.youtube.com/watch?v=1FXuMs6YRCY (Ben Felix - International Diversification)

Gulliver wrote: ↑Sun Aug 13, 2023 6:42 am The 40 year total return advantage for the S&P 500 versus MSCI World was approximately +1000%. I would’ve thought that was understood too .
...
Here you go.

IMG_1879.jpeg
(Ref: longtermtrends)

Always good to see people bringing actual data into threads on here. Few things I noticed (I've looked at too much MSCI data in the past...

)

- That graph / +1000% figure isn't the total return (i.e. incl dividends), but the price return.
- Including dividends (total return), the advantage for USA vs MSCI World for that period is actually +2800%

- But both these metrics are a bad way to compare though, as they depend on the time-span of the investment: 40 years in this case. The numbers change massively if a 30, 50 years time-span etc.
- Quoting the ratio of how much money you'd have at the ended up with if you had invested a dollar $ each in MSCI USA vs World 40 years ago is clearer I think: you'd only have 1.6 times more money in the USA pot than the World pot at the end. The +1000%/+2800% figure makes the difference seem bigger than it really is on first glance

Gulliver wrote: ↑Mon Aug 14, 2023 6:40 am Yeah, sorry very off-topic, but I couldn’t resist.
Don’t follow my lead please.

Guilty as charged, and ready for my sentencing from Ben

Posted: **Mon Aug 14, 2023 2:25 pm**

Great point about using total return instead of index return. Reinvesting the dividends is what is all about - I also made sure to use the total returns (that is what the TR stands for in the screenshot) in my comparison to gold ... which obviously doesn't pay dividends and in fact costs money every year to store safely.

Honestly I do expect the US to underperform ex-US over the next few years... but I have thought this for at least a decade and been wrong (early?!) the whole time. Very few people can do good market timing, and almost nobody can do it consistently. Best not to try and simply go for a broad low cost index fund and be done with it.

Posted: **Mon Aug 14, 2023 2:32 pm**

TBS wrote: ↑Mon Aug 14, 2023 1:56 pm
Deep Blue wrote: ↑Mon Aug 14, 2023 6:36 am Re: Gulliver - Nice job

In using MSCI World returns, I was just trying to using a broad an index as possible… we can all predict what’s happened in the past and my experience is that I’m rubbish at market timing and trying to pick this region over this region invariably results in subpar returns (for me).

So rather than trying to pick US vs Europe or Japan vs China or tech vs healthcare or whatever I just slam it all in broad market indexes and accept average equity returns…. In the secure belief these will beat cash, bonds and gold over the very long term.
Yes this is an important point. Anyone who argues against internationally diversifying stocks just because the USA has done well in recent history needs to watch this: https://www.youtube.com/watch?v=1FXuMs6YRCY (Ben Felix - International Diversification)

Gulliver wrote: ↑Sun Aug 13, 2023 6:42 am The 40 year total return advantage for the S&P 500 versus MSCI World was approximately +1000%. I would’ve thought that was understood too .
...
Here you go.

IMG_1879.jpeg
(Ref: longtermtrends)
Always good to see people bringing actual data into threads on here. Few things I noticed (I've looked at too much MSCI data in the past... )

- That graph / +1000% figure isn't the total return (i.e. incl dividends), but the price return.
- Including dividends (total return), the advantage for USA vs MSCI World for that period is actually +2800%
- But both these metrics are a bad way to compare though, as they depend on the time-span of the investment: 40 years in this case. The numbers change massively if a 30, 50 years time-span etc.
- Quoting the ratio of how much money you'd have at the ended up with if you had invested a dollar $ each in MSCI USA vs World 40 years ago is clearer I think: you'd only have 1.6 times more money in the USA pot than the World pot at the end. The +1000%/+2800% figure makes the difference seem bigger than it really is on first glance

Gulliver wrote: ↑Mon Aug 14, 2023 6:40 am Yeah, sorry very off-topic, but I couldn’t resist.
Don’t follow my lead please.
Guilty as charged, and ready for my sentencing from Ben

I think the Ben Felix video makes an excellent argument for global diversification, I would note that he would also argue that a 5-factor portfolio would be statistically the best approach.

Regardless, total return is not a reason to own gold. Reducing volatility is. Gold is no worse than the yen as a volatility hedge in my opinion. And buying gilts would only really make sense if you already had the pounds sitting there.

The best overall approach would be to be paid in USD, as a non-American, so you could buy treasuries currency-risk free.

Posted: **Mon Aug 14, 2023 3:00 pm**

TokyoBoglehead wrote: ↑Mon Aug 14, 2023 2:32 pm I think the Ben Felix video makes an excellent argument for global diversification, I would note that he would also argue that a 5-factor portfolio would be statistically the best approach.

True. I'm not seen the case made for factor investing for long term Japan residents yet though. Certainly in iDeco/tNISA, I don't know of any reasonable factor investing mutual funds, exploiting the tax benefits of those wrappers and internal dividend reinvestments.

Does anyone know of any Japan investor specific analyses? Factor investing seems quite undeveloped here tbh.

Posted: **Tue Aug 15, 2023 5:45 am**

TBS wrote: ↑Mon Aug 14, 2023 3:00 pm
TokyoBoglehead wrote: ↑Mon Aug 14, 2023 2:32 pm I think the Ben Felix video makes an excellent argument for global diversification, I would note that he would also argue that a 5-factor portfolio would be statistically the best approach.
True. I'm not seen the case made for factor investing for long term Japan residents yet though. Certainly in iDeco/tNISA, I don't know of any reasonable factor investing mutual funds, exploiting the tax benefits of those wrappers and internal dividend reinvestments.

Does anyone know of any Japan investor specific analyses? Factor investing seems quite undeveloped here tbh.

It was possible with the old IBKR, but it is now not a feasible strategy. One needs a broker with access to most of the NYSE/NASDAQ. I could not be bothered, and I am glad I did not.

Perfection being the enemy of the good and all, one cannot really hope to do much better than a globally diverse, low-cost, dividend-reinvesting mutual fund.

Posted: **Wed Aug 16, 2023 8:10 am**

TBS wrote: ↑Mon Aug 14, 2023 1:56 pm
- That graph / +1000% figure isn't the total return (i.e. incl dividends), but the price return.
- Including dividends (total return), the advantage for USA vs MSCI World for that period is actually +2800%
- But both these metrics are a bad way to compare though, as they depend on the time-span of the investment: 40 years in this case. The numbers change massively if a 30, 50 years time-span etc.
- Quoting the ratio of how much money you'd have at the ended up with if you had invested a dollar $ each in MSCI USA vs World 40 years ago is clearer I think: you'd only have 1.6 times more money in the USA pot than the World pot at the end. The +1000%/+2800% figure makes the difference seem bigger than it really is on first glance

Good point about the dividends, not to mention compounding.

Since I failed advanced maths, this is a fun easy to understand calculator I like to use to wrap my head around the importance of compounding:

https://www.investor.gov/financial-tool ... calculator

To get a more real world sense of what a middle class tax sheltered investment would be like, I input your 7.7% iMSCI World return versus an approximate 11.6% for S&P 500. I invested $1000 a month for 40 years and came out with $2,892,787 vs $8,319,595 respectively. Does that sound right?

Posted: **Wed Aug 16, 2023 8:47 am**

Oh, and in the interest of getting back on topic this would be ¥1,210,605,067 as of today (insert Dr. Evil meme here)

.

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