RetireJapan

Q6. What is your view on the effectiveness of investing in foreign bonds?
　Since yields on bonds from developed foreign countries have recently risen more than they did at one time, it can be said that the possibility of gaining the benefits of diversification between domestic and foreign stocks and foreign bonds has become greater than before.

　However, the diversification effect between bonds and stocks is not necessarily stable, and the risk premium that can be expected to be earned within a certain amount of investment is small when funds are invested in bonds, so it is not possible for individual investors to invest large amounts of money or to manage leveraged investments easily and at low cost. Therefore, it seems that there is not much, if any, potential for individual investors to improve their portfolios by adding investments in foreign bonds to their portfolios. In many cases, it would be better to allocate some or all of the money to domestic and foreign equities.

　Considering the benefits of not complicating the investment process, I think it is realistic for many investors to consider that they do not need to expand their investments to foreign bonds.

Q6.海外債券への投資の有効性をどのように考えていますか？
　昨今海外の先進国の債券の利回りが一時よりも上昇してきたので、内外の株式と外国債券との分散投資の効果が得られる可能性が以前よりも大きくなったとは言えるでしょう。

　ただ、債券と株式の分散投資効果は必ずしも安定していませんし、債券に資金を回すと、一定の金額の投資の中では獲得が期待できるリスクプレミアムが小さくなるので、巨額の資金を運用したり、レバレッジ運用が手軽且つ低コストに可能だったりするわけではないので、個人投資家が外債投資をポートフォリオに加えることで運用を改善できる可能性は、あるとしてもそれほど大きなものではないように思います。外債投資に回すお金があれば一部ないし全部を内外の株式に充てる方がいい場合が多いのではないでしょうか。

　運用を複雑化しないことのメリットまで考えると、外国債券まで手を広げなくてもいいと考えておくのが現実的な投資家が多いと思います。

zeroshiki wrote: ↑Fri Mar 03, 2023 3:00 am That last line should be stamped all over this forum and the site. RJ already uses a version of it when he talks about investing but I think we really need it drilled into our heads that for most of us, we're not smart enough to beat the system and we shouldn't try.

northSaver wrote: ↑Fri Mar 03, 2023 3:32 am "Considering the benefits of not complicating the investment process, I think it is realistic for many investors to consider that they do not need to expand their investments to foreign bonds."

If so, what's that got to do with beating the system? Bonds are a valid and important part of many portfolio strategies, which have historically produced good returns with reduced risk (the portfolios that is, not the bonds in isolation). In my opinion there is absolutely nothing wrong with including bonds in your investment portfolio - right now or ever! Unless I'm missing your point? Thanks.

northSaver wrote: ↑Fri Mar 03, 2023 3:32 am [which] line?

zeroshiki wrote: ↑Fri Mar 03, 2023 5:29 am 投資は人生のためにあります。人生が投資のためにある訳ではありません。
Last line is roughly: Investing should help your life, it should not consume it.

zeroshiki wrote: ↑Fri Mar 03, 2023 5:29 am Sorry if I didn't make myself clear. I meant his parting words on the article itself:
...

TokyoBoglehead wrote: ↑Fri Mar 03, 2023 5:12 am Most historic arguments for the benefit of bonds in a portfolio are written from the perspective of an American investor investing in USD denominated bonds. Thus taking no currency risk. (Substitute in Euro/Pound/CAD etc)

For YEN investors bonds are much less of a risk free investment option, and less of a "sure thing" as American treasuries present significant currency risk, and JGBs offer little to no yield. We also do not have much access to the massive great bond market that makes up "most" of the investing landscape.

northSaver wrote: ↑Fri Mar 03, 2023 6:25 am The spanner in the works is the weak yen and currency risk. But that applies to all foreign funds, not just bonds.

TokyoBoglehead wrote: ↑Fri Mar 03, 2023 9:03 am
A rise in JPY could easily wipe any profit an investor was expecting when it comes to foreign bonds. A Japanese investor must be conscious of the fact that foreign bonds are not necessarily a "safer" investment.

TokyoBoglehead wrote: ↑Fri Mar 03, 2023 9:03 am What is true for American in USD is not true for Japanese investors in Yen.