Summary of practical ways to invest in yen

Hello, I'm Dreaming Pig, and this time I'm going to follow up on my last post and write a quick post about how I'm investing in the yen.

 

https://dreaming-pig.tistory.com/585

 

Last time, I said that there are about four ways to invest in the yen. Among them, I am using the method of buying and selling yen directly and buying ETFs. However, it is not an ETF related to the Japanese stock market, but an investment in the US market listed in the Japanese market. Just like Koreans invest in the US stock market, Japanese people invest in the US market. You can think of it as a way to borrow money cheaply in Japan and invest in the US market. If you think of it as real estate, it's like borrowing money at a low interest rate and buying an apartment in the metropolitan area?

 

1. exchange rate

Currency arbitrage is not a great way to invest.

  The basic context is to buy when it's cheap and sell when it's expensive. I am investing in the seven-split method, which is the investment method of "Park Sung-hyun". Of course, I invested with seven entities (account 1, account 2......7), and now the number of entities is much larger, but the context is to buy in segments and sell in segments when there is a small profit. For a brief example, I bought the yen at 875 and then converted the yen to the won at 882 as shown below.

 

   This has been explained a lot, so I won't go into it separately, but it's not difficult and if you're not greedy, you can make a profit even if it's small enough, so I recommend it to beginners like me.

Source: Naver

2. Investing in ETFs

   If you buy KRW with JPY to take advantage of the exchange rate, as shown above, you will have more accounts in a downward curve as shown in the graph above. In other words, deposits will inevitably accumulate, so I don't want my deposits to be tied up, so I look for investment methods. In the case of the dollar, there are short-term bonds called RPs, so you can keep rotating them, but it's hard to find RP investments in yen. So I thought I should go long term anyway, so I considered investing in ETFs.

 

But I personally don't see the Japanese market as very bright, or to be more precise, I don't see it as a growing market, so I'm happy that the exchange rate is down, but I'm not betting on growth, so I've decided to borrow cheaply from Japan and bet on the U.S. market. And to be precise, I'm investing in U.S. bonds (20-year) and the U.S. market (S&P).

I don't know how to play the game, and I don't have any instincts or investment skills, so I'm just content to ride the big money wave and go as far as it takes me, but I'm betting on the probability that it will go up given the time variable (compounding).

 

For now, here's what I invested in

The iShares S&P 500 JPY Hedged ETF (2563) and the Ishares 20+year US Treasury Bond JYP Hedged ETF (2621) are both ETFs listed on the Japanese stock market and trade in yen. The main differences between the two ETFs are

 

Attributes	iShares S&P 500 JPY Hedged ETF.	Ishares 20+year us treasury bond jyp hedged etf.
Following Index	S&P 500	U.S. Treasuries with a maturity of 20 years or more.
What to invest in	U.S. stocks	U.S. Treasuries
Risk level	High	Low
Yield	Volatility	Stable
Whether to hedge	Implementing currency hedging	Implementing currency hedging

drive_spreadsheetExport to Sheets

Investing.com

The  iShares S&P 500 JPY Hedged ETF is an ETF that invests in U.S. stocks. The U.S. stock market is the largest stock market in the world, and it tends to have high growth and high returns. However, it is also highly volatile, so you should be aware of the risks when investing directly.

The Ishares 20+Year U.S. Treasury Bond JYP Hedged ETF is an ETF that invests in U.S. government bonds. U.S. Treasury bonds are bonds issued by the U.S. government, which tend to be more stable and have lower yields. Because of their low volatility, they can reduce risk when investing.

Which of the two ETFs is more suitable depends on the investor's investment objectives and risk appetite.

• If your investment objective is growth and you're looking for a high yield, the iShares S&P 500 JPY Hedged ETF is for you.
• If your investment objective is stability and low risk, the Ishares 20+ year us treasury bond jyp hedged etf is for you.

We also recommend that you consider the recent performance of the two ETFs and currency fluctuations when making your investment decision.

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   Actually, the main factors to consider when investing in these two stocks are interest rate changes in the US market and exchange rate changes in the yen. Since we don't have the ability to take both into account, we can only consider interest rate changes in the US market by removing the fluctuations in the yen exchange rate. This can be eliminated by trading a hedge, and considering that interest rates in the U.S. market could go up but are more likely to go down, bonds are very attractive.

 

   Currently, Japanese interest rates are falling, but no one knows what will happen. In fact, even if it goes up, it's hard to predict how long the interest rate will stay low because Japan's strong capitalization will push down the exchange rate. That's why you want to avoid volatility in the yen exchange rate.

Both the iShares S&P 500 JPY Hedged ETF and the Ishares 20+year US Treasury Bond JYP Hedged ETF are currency hedged in yen, so their performance is not affected by rising Japanese interest rates.

 

Investing.com

 

  Currency hedging refers to fixing the exchange rate of the yen in advance through futures or options to reduce the risk of fluctuations in the yen's exchange rate. Therefore, an ETF that is currency hedged will have limited fluctuations in returns due to changes in the yen's exchange rate.

As Japanese interest rates increase, the value of the yen decreases. Therefore, for unhedged ETFs, an increase in Japanese interest rates may decrease the ETF's return. However, for ETFs that are currency hedged, an increase in Japanese interest rates will not affect the ETF's performance.

However, in order to reduce the risk of fluctuations in the exchange rate of the yen, there may be a cost involved in implementing a currency hedge. Therefore, ETFs with a currency hedge may have somewhat lower returns than ETFs without a currency hedge.

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Let's summarize.

Basically, nowadays, when the yen is low, you change the Korean won to the yen and sell it back to the Korean won when it goes up, so you first invest in exchange rate profit, and at this time, you accumulate deposits and invest them in Japanese ETFs. However, the Japanese market itself does not have high growth, so we invest in the U.S. market in yen, taking into account factors such as growth rates and interest rate declines in the U.S. market. Now that I have the big picture, I'm a little confused about how to invest in the S&P and bonds.

   Next time, I'll try to write a post with their portfolios ^^.