Even if the Nikkei hits 70,000, my assets won't grow that much! An ADHD investor's thoughts on rising interest rates and diversification

The Nikkei Stock Average has once again touched the 70,000 level during trading hours.

As an investor holding Japanese stocks, this should normally be good news.

However, to be honest, in my case, I don’t feel like I’m benefiting that much.

I don’t primarily hold products linked to the Nikkei Average; instead, I own many individual stocks such as Mitsui High-tec, Hamamatsu Photonics, SUMCO, Gokurakuyu, and Sharp.

Even if the Nikkei Average rises, it doesn’t necessarily mean the stocks I own will rise in the same way.

Amidst all this, what I’m concerned about is bonds.

If stocks go up, do bonds go down?

As part of my diversification strategy, I also hold the GO Fund.

This is to avoid concentrating my assets solely in stocks.

However, that GO Fund has dropped significantly in September. Well, I suppose it has the image of being managed with bonds.

It gives me mixed feelings, thinking, ‘I hold this for diversification, yet it’s dropping too.’

The background to this is a global sell-off of bonds.

Crude oil prices are high.

Caution regarding rising prices is intensifying.

Interest rates are remaining high.

As a result, downward pressure is being applied to the prices of bonds that have already been issued.

For example, suppose you hold a bond that was previously issued with a 3% interest rate.

If the interest rate on newly issued bonds subsequently becomes 5%, the new bonds look more attractive to investors.

As a result, the price of existing bonds falls.

In other words,

Rising crude oil prices → inflation concerns → rising interest rates → falling bond prices

This is the sequence.

It is said that bonds with longer maturities are particularly susceptible to interest rate fluctuations.

The recent decline in the GO Fund is not unrelated to these movements in the bond market.

In the short term, it’s a rather unpleasant market

Looking at it in the short term, the current market is not very pleasant.

Stocks seem to be rising.

But my individual stocks aren’t rising as much as the Nikkei average.

The bond-related funds I hold for diversification are also falling.

It makes me wonder, ‘So, what exactly is going up?’

When you are investing, these things happen.

The overall market is rising, but my assets aren’t growing much.

Conversely, when the overall market is falling, my assets fall along with it.

Even when I hear ‘Nikkei hits record high’ on the news, looking at my own asset valuation makes it hard to be that happy. I imagine most investors have experienced this at least once.

In the medium term, watch interest rates and the economy

In the medium term, it becomes important to see how high interest rates will go, what will happen with inflation, and how the economy will trend.

If interest rates continue to rise, it could become an even greater headwind for bonds.

On the other hand, if interest rates stabilize, we could see a phase where bond prices recover.

The same applies to stocks.

Will high interest rates squeeze corporate profits and capital investment, or will the strength of the economy and corporate performance outweigh that?

If you only look at short-term price movements, you won’t understand this.

That is why I try not to immediately think that the GO Fund was a “failure” just because it went down.

In the first place, diversification is not about expecting everything to rise at the same time.

In the long term, there is meaning in diversification

When you think in the long term, your perspective changes a little.

It is not guaranteed that only stocks will continue to rise.

Interest rates, inflation, and the economy all change.

The price movements of assets change every time that happens.

That is why I diversify my assets not only into stocks but also into bonds and other things.

Of course, just because you diversify does not mean you won’t lose money.

If you look at the recent decline of the GO Fund, that is clear.

Even so, for me, it is better to split my assets in several directions rather than betting on just one asset.

For someone like me with ADHD, that makes it easier to continue investing.

I believe that avoiding situations where you want to sell everything when stock prices move significantly is one way to continue investing for a long time.

Don’t just look at “how much profit I made now”

I have never borrowed money to invest.

Therefore, just because interest rates have risen does not mean the repayment amount on my loans will increase.

On the other hand, the prices of the stocks and bonds I am invested in will fluctuate.

I have no choice but to accept that.

In the short term, I am a little disappointed to see the GO Fund decline.

In the medium term, I will watch the direction of interest rates and inflation.

In the long term, I will continue to hold a diversified portfolio including stocks and bonds.

I think that level of detachment is just right for me right now.

Even if the Nikkei average reaches 70,000, it doesn’t mean my own assets will increase by the same amount.

If the GO Fund drops, I still feel a little sad.

Even so, investing is not a game of chasing just one number.

There are times when stocks rise, and times when bonds fall.

If interest rates rise, the investment environment will be different from what it has been.

While experiencing such changes, I will continue to invest in a way that suits me.

For an ADHD person like me, it seems that growing assets over a long period of time suits me better than being swayed by short-term price movements.

Note

*Generally, there is an inverse relationship between bond prices and interest rates. However, the net asset value of the GO Fund is not determined solely by the bond market, but fluctuates depending on the assets held and the investment policy. Also, it is not a simple relationship where ‘if stocks are high, bonds must be low,’ as multiple factors such as the economy, monetary policy, inflation, and supply and demand have an impact.