Why would anyone invest in these funds?

srinir said:
Have you worked out the details?

Here is the link with worked out details.
https://www.elitetrader.com/et/thre...st-index-investing.297648/page-9#post-4528944
More...

The details lazily calculated (45 years working life, 30% saving rate, withdraw rate 3% of 1985 total net-worth + the dividend)

Salary data here http://nbakki.hatenablog.com/entry/Changes_Wage-Workers_Salary_1950-2013


I don't have dividend details but I assume you will save up the dividends in your working life and use it later.

If you worked 40 years instead of 45 you would have about 7M yen remaining in 2017.
 
Last edited:
You need to incorporate inflation into account after retire. I know inflation is not an issue for japan. Japanese CPI figure shows, it was 89.7 in the beginning of 1990 and 103.5 during end of 2015. So about 15% of purchasing power erosion.

1) 30% savings rate of gross salary is pretty aggressive (20% reasonable) and 45 years of working life is little generous (40 might be okay). Don't know about tax rates in japan, 30% savings rate before tax is pretty close 50% savings rate after tax in US.
2) 1985 salary is 3,163,000, assuming 80% amount needed to retire, it is 2,530,400. You are assuming half of that. Don't know about your assumption of dividends saved will make up for that.

Anyway good analysis.
 
alexpun said:
The details lazily calculated (45 years working life, 30% saving rate, withdraw rate 3% of 1985 total net-worth + the dividend)

Salary data here http://nbakki.hatenablog.com/entry/Changes_Wage-Workers_Salary_1950-2013


I don't have dividend details but I assume you will save up the dividends in your working life and use it later.

If you worked 40 years instead of 45 you would have about 7M yen remaining in 2017.
More...
@alexpun I assume that the currency is JPY? And thus that the annual withdrawal from the capital equals 1,126,774 JPY? That is hardly enough to live of in current Japan, cost of living is higher than that. If this capital was the only source of income then it would have been depleted by now.
 
srinir said:
Then I would question the investment thesis, without incorporating behavior biases.

I was pointing out to the fact that delayed reaction by investors is one of the main reason for momentum affect. Finally they give up and chase returns. Skeptic view is persistent, that is main reason that premium prevails.

https://www.aqr.com/library/aqr-publications/explanations-for-the-momentum-premium
More...
Yes, I am familiar with the various behaviourist explanations and theories for momentum effects. I am just curious that you're comfortable with an investment thesis which, essentially, explicitly relies on other investors in the market being "stupid".
 
Yes. I posted my asset allocation in other thread.
80% in 14 asset classes, with value tilt, 10% in short vol currently (will move 5% to catastrophic bonds from this allocation) and 10% to trend following to compensate my value bias.
 
HobbyTrading said:
@alexpun I assume that the currency is JPY? And thus that the annual withdrawal from the capital equals 1,126,774 JPY? That is hardly enough to live of in current Japan, cost of living is higher than that. If this capital was the only source of income then it would have been depleted by now.
More...

In Japan if you go through the trouble to buy that basket of stock in the index (well, before futures and etf are invented I suppose), you actually get many shareholder benefits which is sort of monetary reward program for owning the stock. Which can yield about 1% on top of dividends.
https://asia.nikkei.com/Markets/Tokyo-Market/Japan-s-companies-embrace-gift-giving-to-lure-investors

For example, a chain store Bic camara (stock number 3048) would send 1000 yen coupons to the stock owners.
http://www.biccamera.co.jp/ir/service/index.html
owning 1000 stock cost JP¥1,421,000
The company send you 10x 1000yen coupons in a year for owning 1000 stock. If you hold the stock for more than 2 years, you get 2x 1000 yen coupon each year.
So you would get ¥12000 yen coupon to spend with an investment of JP¥1,421,000

If you want to squeeze out every bit of juice, you can buy 100 stock instead and they would still send you 3 coupon each year + 2 for holding it long term.

There are Japanese web sites teaching people how to live off these programs.
------------------------------------------------------------

Calculation assume no dividend, so dividend saved up over these working years can be used to help funding living expenses. You also get dividend which is about 1% in the early day and near 2% recently.

If you work in Japan you are also forced to join this. http://www.nenkin.go.jp/international/english/nationalpension/nationalpension.html
which pay ￥779,300/ year (full benefit amount based on 40 years of fully contributed coverage periods)

----------------------------------------------------------------------------------
Yeah 30% is aggressive, I should have use something like 15%, so just cut the figure into half and adding that to the Japan pension plan.
 
srinir said:
Yes. I posted my asset allocation in other thread.
80% in 14 asset classes, with value tilt, 10% in short vol currently (will move 5% to catastrophic bonds from this allocation) and 10% to trend following to compensate my value bias.
More...

How do you invest in catastrophic bonds?
 
srinir said:
You need to incorporate inflation into account after retire. I know inflation is not an issue for japan. Japanese CPI figure shows, it was 89.7 in the beginning of 1990 and 103.5 during end of 2015. So about 15% of purchasing power erosion.

1) 30% savings rate of gross salary is pretty aggressive (20% reasonable) and 45 years of working life is little generous (40 might be okay). Don't know about tax rates in japan, 30% savings rate before tax is pretty close 50% savings rate after tax in US.
2) 1985 salary is 3,163,000, assuming 80% amount needed to retire, it is 2,530,400. You are assuming half of that. Don't know about your assumption of dividends saved will make up for that.

Anyway good analysis.
More...

I must admit I overestimate how much a Japanese earn in the 60s and 70s. If the salary figure is correct then yeah they would have a tough time.
 
You must log in or register to reply here.
Back
Top