5 Popular Stocks in Japan that Offer Yutai Gifts (July & August 2020 Update)

Posted on August 18, 2020 by TheFinanceNerd

In this post I will present to you my yutai stock picks for July and August 2020. It’s worth noting that July wasn’t a yutai heavy month, especially compared to August and September. Yutai investing might be fun but without wanting to sound too repetitive, I always like to add as a disclaimer that you shouldn’t just pick a stock solely because of its yutai. Rather yutai should just be considered as a perk in addition to the underlying return opportunities that the stock presents. Needless to say, given the uncertainty surrounding financial markets and COVID cases rising in Japan, I would be cautious before making any new purchases.

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Trying out a Robo-advisor in Japan

Posted on May 9, 2020 by TheFinanceNerd

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Robo-advisors have increased in popularity in the past years but are they worth it? I was interested in seeing what they had to offer so I decided to try one out myself to see if these products are viable solutions for people looking to invest for their retirement. For those of you who are new to Robo-advisors, Wikipedia defines them in the following manner:

Robo-advisors or robo-advisers are a class of financial adviser that provide financial advice or investment management online with moderate to minimal human intervention. They provide digital financial advice based on mathematical rules or algorithms. These algorithms are executed by software and thus financial advice does not require a human advisor. The software utilizes its algorithms to automatically allocate, manage and optimize clients’ assets.

Below I have listed a number of popular Robo-advisors in Japan (the list is based on Robo-advisors that I looked up on 7^th May 2020 and is not an exhaustive list).

WealthNavi
Theo
On Compass
Folio
SMBC Robo Advisor

After reading about a number of Robo-advisors, I ended up choosing WealthNavi which seemed to be one of the most popular brands in Japan. The services that all the above brands offer seem to be all comparable where they charge around 1% for an account that invests in a diversified portfolio and performs rebalancing and optimisation.

How it works?

Once you set up the account and login you will be asked to start a questionnaire for the Robo Advisor to assess your risk/return objectives. For WealthNavi there are a total of 5 categories, with 1 being the most conservative and 5 being the most aggressive. The investment universe is limited to the below ETFs, however based on your risk appetite you will see a greater/smaller allocation to stocks. Here are the ETFs that your account balance will be allocated to:

VTI: Vanguard Total Stock Market ETF

https://investor.vanguard.com/etf/profile/VTI

VEA: Vanguard FTSE Developed Markets ETF

https://investor.vanguard.com/etf/profile/portfolio/vea

VWO: Vanguard FTSE Emerging Market ETF

https://investor.vanguard.com/etf/profile/VWO

AGG: IShares Core US Aggregate Bond ETF

https://www.ishares.com/us/products/239458/ishares-core-total-us-bond-market-etf

GLD: SPDR Gold Trust

https://www.spdrgoldshares.com/

IYR: IShares US Real Estate ETF

https://www.ishares.com/us/products/239520/ishares-us-real-estate-etf

TIP: IShares Tips Bond ETF

https://www.ishares.com/us/products/239467/ishares-tips-bond-etf

All ETFs are well known, provide good exposure to the market/asset class that they are looking to track with a very low expense ratio. I have added above the links to the fund profiles for those interested in looking at price/performance, fees, distributions, etc.

A Sample Allocation with a risk tolerance of 5.

(Allocation for 26^th July 2019, initial investment 1,000,000, weights rounded at 2 decimal places)

Name	Ticker		Weight
US Stocks	VTI	358,896	34.28%
EU Stocks	VEA	346,262	33.07%
Emerging Market Stocks	VWO	148,698	14.20%
US Bonds	AGG	50,297	4.80%
Gold	GLD	87,136	8.32%
Real Estate	IYR	50,750	4.85%
Cash		4,969	0.47%

Fees: 1% annual fee on your invested balance (excludes your cash weight), for investments over 30MM JPY 0.5% (SOURCE: https://www.wealthnavi.com/).

Rebalancing Frequency

WealthNavi’s algorithm is set to perform rebalancing every 6 months. However, if any asset class deviates from its optimal allocation weight by more than 5%, rebalancing takes place ahead of schedule to bring the portfolio back to the optimal allocations. For rebalancing to take place ahead of schedule please note that you need a minimum balance of 500,000 JPY invested in the account, if your deposit is lower than this amount you will need to wait until the next rebalancing date for the portfolio to be rebalanced back to its optimal allocation.

(SOURCE)

After trying the service, I was able to come up with the following advantages and disadvantages from using Robo Advisors.

Advantages

Automatically generates an allocation based on your risk tolerance

Arguably, one of the main reasons why people choose Robot-advisors is because allocations and rebalancing decisions are done automatically based on pre-defined rules and algorithms with some form of portfolio optimisation taken into account. This is a great advantage if you want to avoid the hassle of having to review your portfolio and having to regularly update the allocations yourself.

No Transaction costs when rebalancing portfolios

Buy/Sell orders in your brokerage account will usually result in transaction costs, however rebalancing done by your Robot-advisor will not result in you incurring these fees. You will be charged a flat fee as a % of your account balance.

Tax-efficient rebalancing

The optimisation algorithm (at least for WealthNavi) is able to factor in taxes when realising gains/losses and offsets them to ensure steady returns whilst minimising tax liabilities.

Disadvantages

High Fees

Arguably, the fees that Robo-advisors charge is one of the biggest drawbacks from this service. Especially if you are paying 1% to hold a balanced portfolio of ETFs this is something that you might want to consider doing yourself if you are able to sit down, measure your risk appetite and do some analysis based on your risk return objectives. There are a lot free softwares out there that perform portfolio optimisation. There is a limit to the transparency that each Robo Advisor will provide in terms of rebalancing rules (especially if this will end up revealing trade secrets) but from what I can gather is that a lot are based on Modern Portfolio Theory and will place your portfolio somewhere on the efficient frontier based on your risk/return constraints.

Value lost from automation/not too much customisation

Some of the value that financial advisors can offer is the tailored financial advice they can give to individuals based on their financial situation and objectives. The bucketing and categorisation that current Robo-advisors perform is still limited in my opinion and is not able to capture the cognitive aspects and intricacies of the investor’s mind.

Conclusion

I believe that the value of Robo-advisors depends a lot on how much time you want to spend in looking at your portfolio. If you are just happy to have your money invested automatically in a diversified portfolio and want to spend minimum time and effort in working out portfolio weights, buy/sell timings I do see a value in this service. If instead you are happy spending some time reviewing your allocations and making your own investment decisions, I believe that spending additional fees on a Robo-advisor just ends up hurting your returns and you have much cheaper ways for obtaining comparable results. There are also a lot of ETFs out there which already provide a very good level of diversification at extremely competitive management fees.

How to Avoid Getting Ripped-Off on your Currency Exchange

Posted on November 17, 2019 by TheFinanceNerd

Before I get started, please note that I am not affiliated with any of the products mentioned in this blog. I am just an individual who was fed up of getting bad exchange rates and decided to do some research and I would like to share my findings with you. You might be able to find some better deals, in such case I strongly encourage you to share them in the comments section so other readers can also benefit.

This article is aimed at individuals like me who are based and work in Japan and who are looking to convert their hard-earned JPY into a foreign currency and get a decent rate. The main reason why I started looking into this was to purchase some travel money for my upcoming trip to the US. Another reason was to be able to build up some savings in EUR and GBP and convert at a good time.

My Requirements

My extended trip to America was approaching and I started doing some research to get good value in buying dollars. I am aware that the spread for USDJPY is narrow and that even when you get a sub average deal the commission is borderline negligible (especially when converting small amounts for travel money), however this time I wanted to find some providers that would allow me to get decent rates in future transactions.

When travelling, I decided that I wanted to have a portion of dollars in cash and have the flexibility of paying by credit card. I wanted to:

– Avoid getting rubbish rates when converting to cash or when getting charged on my credit card

– Avoid getting additional credit card fees when paying via credit card

– Have some flexibility in watching the FX rate and converting at a good time

Getting Cash

I initially started by looking at physical shops but I soon realised that online FX brokers were the most competitive ones in terms of the spreads offered. An interesting service that really appealed to me was the ability to buy dollars at online broker FX rates and to have the cash delivered to the airport. For example, as of 29^th October 2019, the spread for USDJPY is 0.3 pips which is really good. Compared to that, the banks tend to stick to TTM and TTB + commission (FX rate published by Bank of Tokyo Mitsubishi) which will have a spread of 100 pips for USDJPY. I am not even wasting your time with airport exchanges which will blindly rip you off.

The company that I liked is called “Money Partners”. Being an online broker, their focus is on providing FX trading services and CFDs, but what stood out to me at on their website was their “airport cash delivery service”

https://www.moneypartners.co.jp/

I have been trading FX for a while and I was also drawn to the fact that you can set a delivery date and in the meantime also pocket the swap rate which is non negligible when you are long (is that correct, idk what i means?) USDJPY (usually it’s about 60 JPY/day per contract). I don’t want to digress too much though from the primary purpose of buying travel money at a cheap rate.

With Money Partners you pay a flat fee of 500 JPY and can collect your money at the airport with the conversion rate being pretty much what you would get on your online FX brokerage account. You just go to the Travelex counter and Money Partners will have sent them an envelope with your cash (you need to collect the money by the designated collection date). I tried picking up my dollars at Haneda airport and the overall experience was positive; as soon as I got to the counter and showed my Partners Receipt the employee just asked for some form of ID and handed me the envelope (please note that the money will be taken out from the/your online brokerage account).

Sorting out the Card Part

In addition to cash I also wanted some flexibility in being able to pay by credit card. After looking online, I found a few blogs which recommended Sony’s Money Kit card.

This is a prepaid debit card which allows you to hold non JPY denominated accounts (ex. EUR, USD, GBP).

Info regarding this product can be found here:

https://moneykit.net/visitor/sbw/

This is how it works:

I pay abroad, let’s say in New York and pay via this debit card. If my USD balance is positive then the transaction will come out directly from the USD denominated account at no additional fee. The fee part was very important for me as a lot of Japanese card companies allow you to use their cards abroad but then to charge you 1-2% in fees.

If instead I only had JPY in my account Sony would have deducted the charge from my JPY account charging me a flat fee and converting at the prevailing spot rate. If the current exchange rate is favourable to you and you want to lock into it I recommend holding a reserve of foreign currency so that you can access that when you go abroad. Another positive in holding non JPY is that (with the exception of EUR) the prevailing rates will be higher (although you are taking FX risk so please be careful).

Lastly, another thing/something that is worth noting is that the Sony Card also allows you to withdraw cash abroad from ATMs. However, I did notice that usually local ATMs tended to charge you $4.50 for that luxury.