RetireJapan

alberto wrote: ↑Fri Oct 27, 2023 4:34 am MSCI World is a conservative investment.

Nope. Not ever.

Yes, you're correct, good point. The original index doesn't include Japan. This would be the correct comparison, which is basically the same in the end, with the same conclusion: small deviation of the hedged ETF from the original index, and huge deviation of the unhedged ETF.

alberto wrote: ↑Fri Oct 27, 2023 4:59 am ...

Alberto--just curiosity, so ignore this if you want, but does your last name (five letters) begin with a C?

Tsumitate Wrestler wrote: ↑Fri Oct 27, 2023 5:16 am After looking through your posts I think I see the use you are comparing 2513, 2514 and URTH. They track different indexes.

MSCI world is not the same as MSCI Kokusai

Ishares MSCI World ETF - Ticker URTH Benchmark Index - MSCI World Index
__________________________________________________
Nextfund 2514 外国株式・ＭＳＣＩ－ＫＯＫＵＳＡＩ指数（為替ヘッジなし)
Nextfund 2513 外国株式・ＭＳＣＩ－ＫＯＫＵＳＡＩ指数（為替ヘッジあり)

MSCI-KOKUSAI指数（円ベース・為替ヘッジあり）（対象指数）に連動する投資成果を目指しま
す。
We aim to achieve investment results that are linked to the MSCI-KOKUSAI index (yen base, currency hedged/{or unhedged}) (target index).

—-----------------------------------------------------------

The NYSE ETF is ticker -> TOK
https://www.ishares.com/us/products/239 ... okusai-etf

That tracks the same index (Kokusai) on a USD basis.

alberto wrote: ↑Fri Oct 27, 2023 5:27 am Yes, you're correct, good point. The original index doesn't include Japan.

I am glad we caught that.

This would be the correct comparison, which is basically the same in the end, with the same conclusion: small deviation of the hedged ETF from the original index, and huge deviation of the unhedged ETF.

A 5.5% difference over 5 years is a lot. Basically a 1% yearly extra fee. That is a huge premium to pay for matching the USD Kokusai's (TOK) performance. However, if you are comfortable with that. Then that is basically the end of the discussion.

Characterizing a short-term equity investment as conservative though, is not a matter of opinion. All future predictions are made using past data. That volatility data clearly shows the associated risks.

Your positions are fundamentally incompatible:

A. I don't want currency risk in both directions. I will pay to hedge against a rising yen. But open myself up to the risk of a falling yen.

B. I do not think equities pose a short-term risk, and a global stock ETF is a conservative allocation

Your relationship with risk and understanding of risk seems emotional and arbitrary. I hope that does not seem too judgemental.

Edit: I think all that has can be said, has been said. Best of luck.

Tsumitate Wrestler wrote: ↑Fri Oct 27, 2023 6:08 am A 5.5% difference over 5 years is a lot. Basically a 1% yearly extra fee. That is a huge premium to pay for matching the USD Kokusai's (TOK) performance. However, if you are comfortable with that. Then that is basically the end of the discussion.

Characterizing a short-term equity investment as conservative though, is not a matter of opinion. All future predictions are made using past data. That volatility data clearly shows the associated risks.

Your positions are fundamentally incompatible:
A. I don't want currency risk in both directions. I will pay to hedge against a rising yen. But open myself up to the risk of a falling yen.
B. I do not think equities pose a short-term risk, and a global stock ETF is a conservative allocation

Your relationship with risk and understanding of risk seems emotional and arbitrary. I hope that does not seem too judgemental.

No, your calculation is not correct. You just went to the last date and measured the difference between the hedged ETF and the index. But that difference varies in time, sometimes the hedged ETF is over the index, sometimes below. The maximum volatility can go up to 5% in the short term, but it's not an accumulative fee as you're saying, but some small tracking difference with the index. Compare that short-term small-difference of the hedge ETF up to 5% with the long-term huge-difference of the unhedged up to 50%, and now tell me who is adding risk to an investment which is suposed to follow a very conservative and diversified index of world stocks.

alberto wrote: ↑Fri Oct 27, 2023 6:40 am and now tell me who is adding risk to an investment which is suposed to follow a very conservative and diversified index of world stocks.

You are, by imposing a currency view on top.

Deep Blue wrote: ↑Fri Oct 27, 2023 7:34 am

alberto wrote: ↑Fri Oct 27, 2023 6:40 am and now tell me who is adding risk to an investment which is suposed to follow a very conservative and diversified index of world stocks.

You are, by imposing a currency view on top.

That's wrong by definition. Whatever you do, you cannot avoid the "currency view" from the very moment you are buying foreign stocks. There are 2 choices, and you just have to take a look at my chart to see where the additional risk is.

On reflection, with every single poster on this thread telling you that you are wrong, do you feel any doubt?

You can say the same thing one million times, but if it's wrong, it makes no difference how many times you say it. Look at the chart I posted before and explain the rationale of prefering to get a volatility of 50% from the original index compared to a volatility of 5% and tell me why the 1st one is preferable over the 2nd one with an investment as conservative as MSCI World.

alberto wrote: ↑Fri Oct 27, 2023 3:29 pm You can say the same thing one million times, but if it's wrong, it makes no difference how many times you say it. Look at the chart I posted before...

The person getting things wrong here is mainly you.

Another thing you are getting wrong is the chart you posted doesn't even show what you think it does. The hedged MSCI Kokusai fund is not expected to follow the US based Kokusai index like you think. The former is aiming to track the returns of underlying stocks in each of their home countries, i.e. for the non-US stocks in the index that is the returns in EUR, GBP etc., and not the returns in USD which is what the bare index shows.

But the hedged fund cannot even achieve that aim because of the hedging cost, which is especially high at the moment due to the large difference in interest rates between Japan and the RoW.

alberto wrote: ↑Fri Oct 27, 2023 3:29 pm ... explain the rationale of prefering to get a volatility of 50% from the original index compared to a volatility of 5% and tell me why the 1st one is preferable over the 2nd one with an investment as conservative as MSCI World.

Neither of these things are "volatility", but the divergence of the time series from each other. As I and others have tried to explain to you, the main volatility (risk/variance) in investing in foreign equities is the volatility of the equities themselves and not the effect of currency fluctuations. These last two years have been an exception because of the large swing in the JPY/USD rate, but it is wrong to characterize investing in MSCI World as conservative and say the effect of currency fluctuations is the bigger risk, when in fact over the long term it is the opposite that is true.