18 Trillion Yen Goes Poof ¥

by 7 Jul, 2020

18 Trillion Yen Goes Poof

It’s been a rough few quarters. If you missed the five best trading days of the year, you’d still be down 30%. The good news is that at least none of us poured 18-trillion-yen down the drain. We all outperformed the Japanese government, investing the world’s largest pension pot.

The aging retirees of Japan best not look at their Roth-equivalents after state officials took active stock-picking into their own hands. The government went in big on domestic and overseas stocks, all battered by the virus, and domestic bonds that have lagged.

We can learn from this. The brains behind the world’s largest pension fund got adventurous with critical money and then considered different asset classes as separated into different mental accounts. As mental accounts, allocations shrunk and grew with all kinds of perverse and financially draining biases, risky and safe bets lumped in together.

The takeaway; don’t pretend some emergency funds are more important than others; try not to consider your investments separated in high-security vaults, immune from bias, transferable only using an elite team of undercover, genetically-modified apes.

The other lesson here is that no matter what the prestige of your resume, education, or past returns, no one’s bigger than the market. If Japan’s high-ranking investment officials Eiji Ueda and Naoki Fujiwara competed in the Invstr Raw Fantasy League last month, they’d have rocked up adrift lower than 600,000 places down in the leaderboards.

The pension fund has changed its allocation to stocks and bonds, foreign and domestic, with a quarter of a reformed pot invested in each. The ranges those allocations can deviate before a rebalancing have also been reined in. We’ll see how this affects fortunes!

I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.

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