SBI iDeCo funds portfolio. Anyone willing to help?

[ivanpgs]

Hi, this is my first comment here,

I applied for an SBI account and I got a lot of links and information about the funds line-up for iDeCo, which is impressively long and they are providing the information for each and every one of them, along with the past month rentabilities. I have to say that it's an overwhelming piece of information (76 pages of report!!!).

I was trying to get through some of this information and I came up with my first pre-portfolio. I just wanted to share with you guys. At least if you are using SBI as your brokerage then you could find it familiar.

These are the funds that I chose:

• 35% for ＤＣインデックスバランス（株式４０）… 0.1944 (fee)
  15% for ＤＣニッセイ外国株式インデックス … 0.2268 (fee)
  15% for ｉＦｒｅｅ　ＮＹダウ・インデックス … 0.2430 (fee)
  35% for ｉＦｒｅｅ　８資産バランス … 0.2484 (fee)

About me, I will be turning 40 years old next year, and as an employee of a company without private pension system/benefits I can put up to 23K yen a month for the iDeCo.

I did not want to put everything into stocks, so I thought that bonds could also be a part of my portfolio.

I though that the 35% for ＤＣインデックスバランス（株式４０） could be not so risky, as only 40% of this balance fund is on stocks (25% Japan, 15%US) and the rest is mostly bunds, as you highlighted. I know I could have chosen the same fund family but with more risk into stocks （株式6０）or （株式8０）.

Also the balance fund ｉＦｒｅｅ　８, according to the SBI report it seems it has:

• 26% in foreign bonds,
  24% in foreign stocks,
  12% in foreign REIT, 12% in japanese stocks,
  12% in japanese bond,
  12% in japanese REIT and
  the rest is just others.

I thought it was a good balance and it also got the 4th position in the Fund of the Year 2016 (http://www.fundoftheyear.jp/2016/1.html). Well, actually last year was the very first year for this fund.

So I wanted to have like a 70% on this balance funds, and then the rest of the 30% on another stock funds, but as you were mentioning even the balance funds have some positions in stocks (both Japan and US).

One of the things that I liked from the ｉＦｒｅｅ　ＮＹ (15%) fund is that it wanted to have some product like an ETF for the Dow Jones. The fund compositions is mainly:

• Boeing Co. 7.11%
  Goldman Sachs 6.58%
  3M Co. 6.02%
  United Health Group 5.79%
  Apple 4.83%
  McDonalds 4.72%
  Home Depot 4.44%
  Intl Business Machines 4.22%
  Johnson & Johnson 3.88%
  Travelers Cos Inc 3.60%
  ...

And for the last 15%, again US stocks. ＤＣニッセイ外国株式インデックス:

• Apple 2.43%
  Microsoft 1.54%
  Facebook 1.13%
  Amazon.com 1.11%
  Johnson & Johnson 1.01%
  JP Morgan 0.92%
  Exxon Mobile 0.89%
  Alphabet C 0.82%
  Alphabet B 0.79%
  Nestle 0.74%
  Etc,

Any thought on it? It might be a weird portfolio, so I would like to balance it a little bit more, as it was my very first draft.
Do you think that this it also a very aggressive portfolio? Do you have any recommendation about it?

Sorry about me doing that many questions, but as you can see I am kind of a newbie.

Any opinion about it will be highly appreciate it. (I know investment is sort of personal, but I would be glad of having some opinions / thoughts on that).

[Dan]

Sure. It seems you have put together a portfolio largely focusing on foreign markets.

Nissay’s foreign equity fund has been popular since its launch in iDeCo and regular investment accounts. It has seen more inflows than many other Japanese foreign equity index funds. It was awarded the top position in the fund of the year contest that you mentioned. Nissay's foreign equity DC fund offers exactly the same strategy as that fund because they feed into the same mother fund.

Have you thought about the following funds:
- Nikko index funds
- SBI EXE-i funds

You may have already included one of the Nikko funds in your portfolio（日興DCインデックスバランス）. The fees on the Nikko DC funds are low.

The SBI EXE-i funds have higher fees of about 0.3% to 0.4% depending on the asset class. Most of these funds offer exposure to foreign markets through Vanguard and Schwab ETFs. That’s why I like them.

The exact exposure is shown in the monthly reports of the funds. For example, the SBI EXE-i developed markets equity fund invests about 60% of assets in the Schwab US Broad Market ETF, 30% in the Vanguard FTSE Europe ETF and 10% in the Vanguard FTSE Developed Asia Pacific (ex-Japan) UCITS ETF.

https://doc.wam.abic.co.jp/contents/pdf/89311135_mk.pdf

Hope this helps.

[Jamo]

Hi, and welcome!

Your portfolio is definitely not aggressive. Aggressive generally means 90-100% growth assets (stocks, property etc.). Your selection appears to contain around 60% of stocks, and around 8% property. So it can be described as a "growth" portfolio (around 70% growth assets).

If I was your age (I'm currently 34), I would still be quite comfortable with an aggressive portfolio (made up of mostly index funds). But everyone has their own risk tolerance, and your current weightings will still serve you well. When I'm around 50 I will consider scaling back to a more balanced portfolio (given that it generally takes around 10 years to recover from a crash).

Also, don't be swayed by past fund performance. It could easily change. I would have a look at the products the funds hold and their fees and decide from there. And there's no need to overdo it with multiple fund selections if the funds hold similar products. I would just go with the one with the cheapest fee

[ivanpgs]

Good morning Dan,

Thank you for your reply. I really appreciate it!

After your answer I had a look at the SBI EXE-i funds for developed markets equity fund and it looks nice. I am thinking about pulling it in and remove one of the four I took. All in all, I have not sent yet the letter with all my choices to SBI. Just working in the funds draft.

And as also Jamo is saying in the other response (thanks Jamo!) I might not need 4 funds but less if all the assets that I want to invest are already covered there.

How about the next portfolio?

*** foreign stock markets ***
- 50% -> EXE-i 先進国株式ファンド … 0.1944 (fee)
- 60% of assets in the Schwab US Broad Market ETF,
- 30% in the Vanguard FTSE Europe ETF
- 10% in the Vanguard FTSE Developed Asia Pacific (ex-Japan) UCITS ETF.

*** balance funds ***
- 50% -> ＤＣインデックスバランス（株式４０）… 0.3244 (fee)
- 30% Japan equities
- 10% US equities
- 45% Japan bonds
- 10% US bonds
- 5% 短時資産 short time property investment???

Now I just changed from 4 funds to just 2 funds, and the portfolio stills close to the 70% growth assets that Jamo was mentioning on his response. It can be also easier to follow up.

One more question, if I might ask. I saw that you can change your funds to buy once per year, but, are we allowed to sell funds also or we just need to keep up all the fund participations that we bought until we retire (60 years old)?

Thank you again for your help. I have so many things to learn about fund investments...

[RetireJapan]

One more question, if I might ask. I saw that you can change your funds to buy once per year, but, are we allowed to sell funds also or we just need to keep up all the fund participations that we bought until we retire (60 years old)?

iDeCo is a retirement account, so you cannot get the money until you reach 60. You can leave your investments in the account until you reach 70 if you choose (and they remain tax-free). However, if you die your heirs get the balance of the account

[Dan]

RetireJapan has already answered your question about restrictions on taking money out. I think it’s good that people aren’t able to dip into their iDeCo retirement savings before the age of 60.

In addition to that, I believe you’re allowed to change your portfolio allocation and change the amount you invest every month once a year. The minimum investment amount is set at ¥5,000 a month. I believe it’s possible to stop payments altogether if you like but I wouldn’t recommend that unless you have no other choice.

[RetireJapan]

I just realised you may have been asking about rebalancing the account (called 'switching' by providers).

You can do this in your account. You choose which investments to sell, and which to buy. It's relatively easy. I just did it for my daughter -her account was set to automatically invest in cash deposits, so I switched that money to another fund.

[ivanpgs]

Hi Dan and RetireJapan, and thanks for your answers,

Actually I did know about that I cannot get the money until I reach 60, maybe I formulated the question in the wrong way (English is not my native language).

Putting my words into an example, let's assume that I just contribute every month with 23K and my portfolio is:

Code: Select all

- 50% for Fund-A (11.5K per month)
- 50% for Fund-B (11.5K per month)

Assuming that I got approved and start the investment from January, and that I can change my portfolio allocation once a year, if I decide to change that in July, then I would have the next situation:

Code: Select all

- From January to June, 6 months:
- 69.000 (11.5K x 6) yens spent on Fund-A
- 69.000 (11.5K x 6) yens spent on Fund-B

Let's say that I am uncomfortable with Fund-A and I want to change to buy Fund-C with same percentage (50%).
Then in the end of the year, December I would have the next situation:

Code: Select all

- 69.000 (11.5K x 6) yens spent on Fund-A
- 138.000 (11.5K x 12) yens spent on Fund-B
- 69.000 (11.5K x 6) yens spent on Fund-C

So I can change the allocation of my portfolio like stated below, but can I sell the Fund-A acquired participations to buy Fund-C participations? (I guess not).

To summarize. I know I cannot retire any money that I put into the iDeCo until I have 60 years old, but I did want to know
if selling a fund participations to have cash to buy another fund participations was allowed. Or even sell that fund participations because is performing bad and you want to have cash for another opportunity in another fund (or to make a more conservative investment).

I hope I did explain myself this time

Sorry again for so many questions about it, but hopefully this example can be also interesting for another newbies to the iDeCo in the future.

Thank you very much in advance again for all your help! I really appreciate it!

[RetireJapan]

See the post before your last one, but the answer is: yes, you can sell things in your account and use the money to buy other things (or even put the money into a cash account to keep it safe as you get closer to needing it).

[ivanpgs]

I just realised you may have been asking about rebalancing the account (called 'switching' by providers).

You can do this in your account. You choose which investments to sell, and which to buy. It's relatively easy. I just did it for my daughter -her account was set to automatically invest in cash deposits, so I switched that money to another fund.

Yes! That is totally what I meant!
Actually I just wrote a message explaining myself with a practical example, but now I know the word for that. Either switching or rebalancing is allowed. That's good and also a relieve!