RetireJapan

Post by JAH » Mon Jun 10, 2024 11:52 pm

I’m already 55, planning to work until 65, but I’m completely new to investing. I’ve just got an SBI NISA account up and running and have started by maxing out the Tsumitate portion with the E-Maxis Slim all-country fund. I’m now wondering what to do with the rest of the allowance and would love to hear your opinions. I’ve just finished “Millionaire Teacher” and understand the logic of a simple portfolio of index funds + bonds, to be rebalanced once a year and otherwise left alone. But there are still things I’m unsure of, as follows:
- Does being in (and having no plans to leave) Japan mean it would be sensible to include a Japan stocks index fund, or is sticking with a single all-country fund an equally logical strategy? Or is it just a matter or personal preference?
- I understand that bonds play a risk-mitigating role similar to cash. So is it rational to hold bonds if your cash reserves exceed your investments, especially in a NISA account? Would it be more logical to just stick to stock index funds, balanced by cash?
- If bonds do make sense, then in what form? A yen-hedged international fund? Wouldn’t unhedged foreign bonds be just as volatile (in yen) as stocks?
I should add that while I’m late to the game, I don’t anticipate needing to touch my investments for at least 10 years, probably 15. I also think I have the stomach to deal with ups and down in the stock market (and the exchange rate) without panic buying or selling anything, so in that sense I think I have a fairly high risk tolerance. (Although only time will tell whether that’s really the case!)

Welcome to the forum. I will take a first crack at answering.

JAH wrote: ↑Mon Jun 10, 2024 11:05 pm
- Does being in (and having no plans to leave) Japan mean it would be sensible to include a Japan stocks index fund, or is sticking with a single all-country fund an equally logical strategy? Or is it just a matter or personal preference?

Personal preference, I think. Your all-country fund already includes Japan in its appropriate ratio.
So buying any Japan fund would be overweighting Japan in your portfolio.
If you have salary in yen, property here etc I would argue that this is unnecessary. You would be placing a bet that the Japan economy/market will outperform the US/the world in the next 20 years or 30 years or so.

*I have a few Japanese dividend stocks myself so overweight Japan a little this way.

JAH wrote: ↑Mon Jun 10, 2024 11:05 pm
- I understand that bonds play a risk-mitigating role similar to cash. So is it rational to hold bonds if your cash reserves exceed your investments, especially in a NISA account? Would it be more logical to just stick to stock index funds, balanced by cash?
- If bonds do make sense, then in what form? A yen-hedged international fund? Wouldn’t unhedged foreign bonds be just as volatile (in yen) as stocks?

You are correct. Bonds are supposed to mitigate the risk and give you funds to use when the equity markets are down. Cash, of course, is the ultimate liquid asset. Stock index funds and a pile of cash is a decent strategy (how much cash to hold is of course a personal decision).
And as you rightly suggest, there are not any interesting yen-denominated bond funds, so the alternatives are often dollar-based. Whether it is sensible to buy the unhedged developed country bond funds or not has been debated on these forums a few times.

Regarding NISA, I am a big believer in maximizing the benefits it brings. It does not make sense to me to put bond funds or balanced funds in the NISA account. Mine contains the S&P 500 fund and the All-Country fund, mostly.

beanhead wrote: ↑Mon Jun 10, 2024 11:55 pm Your all-country fund already includes Japan in its appropriate ratio.
So buying any Japan fund would be overweighting Japan in your portfolio.
If you have salary in yen, property here etc I would argue that this is unnecessary.
...
Stock index funds and a pile of cash is a decent strategy (how much cash to hold is of course a personal decision).

Thank you very much indeed. That addresses my main concerns very clearly and really helps. Much appreciated

JAH wrote: ↑Tue Jun 11, 2024 12:55 am

beanhead wrote: ↑Mon Jun 10, 2024 11:55 pm Your all-country fund already includes Japan in its appropriate ratio.
So buying any Japan fund would be overweighting Japan in your portfolio.
If you have salary in yen, property here etc I would argue that this is unnecessary.
...
Stock index funds and a pile of cash is a decent strategy (how much cash to hold is of course a personal decision).

Thank you very much indeed. That addresses my main concerns very clearly and really helps. Much appreciated

I think he nailed it.

Global low cost diversified index funds in a reinvesting mutual funds structure. Prioritize your iDeco first, then your NISA, if you are here for the long-term.

Cash as a cushion, foreign bonds could offer some extra yield but the currency risk does not make them a sure bet.

Domestic bonds, and domestic inflation linked bonds are possible options if you want a pinch of yield for your cash-like holdings.

Credit card Tsumitate investing offers a 0.5-1% bonus that is pretty nice if you have the patience for it.

Tsumitate Wrestler wrote: ↑Tue Jun 11, 2024 1:59 am Global low cost diversified index funds in a reinvesting mutual funds structure. Prioritize your iDeco first, then your NISA, if you are here for the long-term.

Cash as a cushion, foreign bonds could offer some extra yield but the currency risk does not make them a sure bet.

Domestic bonds, and domestic inflation linked bonds are possible options if you want a pinch of yield for your cash-like holdings.

Credit card Tsumitate investing offers a 0.5-1% bonus that is pretty nice if you have the patience for it.

Thank you for the added input. I don't have an iDeco account yet, or the credit card that SBI was pushing in the signup process, as I really just wanted to get up and running first with NISA, which is what I've been doing all my homework on. But thank you for bringing those to my attention. I realize that "only" 0.5-1% can add up to a lot over time, and is no doubt worth the effort. Also frustrating that my SBI points system is so far stubbornly refusing to link to my PayPay account due to a supposed difference in registered user details that I can't for the life of me identify, but that's another matter.

Tsumitate Wrestler wrote: ↑Tue Jun 11, 2024 1:59 am Domestic bonds, and domestic inflation linked bonds are possible options if you want a pinch of yield for your cash-like holdings.

Domestic inflation-linked bonds... that sounds interesting... could you recommend something to research? Even the kanji is enough for me to get started.

I am mainly investing in the eMaxis Slim All Country, with a little bit in the eMaxis Slim S&P500. I'd like to put some of my other cash into another vehicle, but without the ups-and-downs of mutual funds... something more stable... the Domestic inflation-linked bonds sounds like something I should look into.

cocacola wrote: ↑Tue Jun 11, 2024 4:09 am

Tsumitate Wrestler wrote: ↑Tue Jun 11, 2024 1:59 am Domestic bonds, and domestic inflation linked bonds are possible options if you want a pinch of yield for your cash-like holdings.

Domestic inflation-linked bonds... that sounds interesting... could you recommend something to research? Even the kanji is enough for me to get started.

I am mainly investing in the eMaxis Slim All Country, with a little bit in the eMaxis Slim S&P500. I'd like to put some of my other cash into another vehicle, but without the ups-and-downs of mutual funds... something more stable... the Domestic inflation-linked bonds sounds like something I should look into.

I think this is the best fund out there to my knowledge.

https://site0.sbisec.co.jp/marble/fund/ ... =24931104B

Note, this is really not a priority. I would say if you have a year+ expenses in cash, you might want to look into this or JGBs or an account with a .2%+ return through term deposits.

Tsumitate Wrestler wrote: ↑Tue Jun 11, 2024 4:17 am I think this is the best fund out there to my knowledge.

https://site0.sbisec.co.jp/marble/fund/ ... =24931104B

Note, this is really not a priority. I would say if you have a year+ expenses in cash, you might want to look into this or JGBs or an account with a .2%+ return through term deposits.

Thank-you for the link! I will look into it more.

In terms of cash, I have a bit of "liquid" cash, as well as an emergency fund that will last our family about 7-months if we don't change our lifestyle much. All of the cash is just sitting there. I was thinking of investing the emergency fund, but the volatility of stocks (and even mutual funds) made me decide to just keep it just as cash. Plus, in an emergency, selling shares seems to take about a week on Monex (why it takes that long is beyond me), so in an emergency, a week's wait may be risky.

I guess the same could be said with term deposits, as the cash would be "locked-up" until the term ends. But at least there is a guaranteed return for that, albeit not very big.

I will look into the term deposits more, as well.

Thanks again!

For what it's worth, some bank offers super-short terms (2 weeks) and it's also possible to cancel that before the scheduled end. You can get back the deposit but would lose any expected return (which, anyway, is ridiculously low).

William wrote: ↑Tue Jun 11, 2024 8:03 am For what it's worth, some bank offers super-short terms (2 weeks) and it's also possible to cancel that before the scheduled end. You can get back the deposit but would lose any expected return (which, anyway, is ridiculously low).

Yeah, you aren't kidding about the ridiculously low returns. I just checked one of my banks and they are offering 0.025% (yes, you read that right) for terms up to 6-months. It goes to (wait for it) -- 0.03% on a 1-year term. Huuwao!