"The Secrets to Building a Wealth of Over 100 Million" What Techniques Are Necessary? Index Investor Kenichi Minase [Part 1] | Learning from the Experts: "The Flow of Money" | Moneyクリ Monex Securities' Investment Information and Media Useful for Money

Kenichi Mizuse, an index investor who has continued to invest for 20 years and has overcome various challenges, including the Lehman Shock. We took the time to ask him about his journey to choosing index investing, how he overcame difficult times, his current portfolio, and his thoughts on future investments.

●Profile of Kenichi Minase●

Born in 1973, a company employee working at an IT firm in Tokyo. Self-proclaimed "individual investor from downtown." The blog "Random Walker in Ume-yashiki Shopping Street (Index Investment Practice Report)" started in 2005 is known as a bible for index investors. His publications include "Let Your Money Sleep and Grow" (Forest Publishing) and "[Completely Revised 3rd Edition] Hands-off Investment Techniques" (Asahi Shinsho, co-authored with Mr. Gen Yamazaki ), among others.

Investment Debut Period Swayed by Short-term Trading

――What prompted your interest in investing?

In my late twenties, a friend once posed a quiz to me, asking, "How much do you think it costs to enter a nursing home?" The answer was unexpectedly high, which made me feel anxious and realize, "I don't have that kind of money..." This prompted me to start researching average savings by age, life plans, money plans, and I began to feel the necessity of investing.

――Please tell me about your first investment.

I picked up money magazines lined up on the convenience store shelves and bought books on stock investment at bookstores to study. Twenty years ago, most magazines and books were based on short-term trading.

So I started day trading, but during the hours when the stock market is open, I couldn't help but be concerned about the stock prices of the stocks I hold. Furthermore, I became constantly vigilant about news in the industry, wondering if rival companies would announce groundbreaking new products or services.

When I was using an investment method close to value stock investing, I became deeply engrossed in stock analysis, often spending entire weekends on it... Being both anxious and meticulous, it started to interfere with my main job and daily life, which led me to feel a sense of crisis, thinking "I can't continue like this."

Discovering your own "optimal investment solution" over 2 years

――Did you shift immediately from value stock investing to index investing?

No, for about two years after that, in order to find my own best investment method, I experimented with various approaches to individual Japanese stock investments, such as value investing and growth investing, as well as trying out active funds and index funds in investment trusts, going through a trial-and-error process.

In such circumstances, I felt that index investing was the most aligned with my way of thinking and personality. Since then, I have continued the investment strategy of making monthly contributions to an index fund diversified across stocks and bonds around the world.

After switching from individual stock investments to index investing, the world around me changed dramatically. I feel like I've regained my humanity; I can now immerse myself in work like I did before I started investing, and I've resumed my hobbies of fishing and snowboarding during my time off. I believe that I've had more time to socialize with friends and even got married because I reevaluated my investment style.

Deliberately choosing "manual accumulation" to be mindful of the market

――Please tell me about your current portfolio.

Asset allocation consists of 4.2% Japanese stocks, 61.0% developed market stocks, 5.0% emerging market stocks, 1.7% REITs (domestic and international), 1.9% foreign bonds, and 26.10% Japanese bonds. In a rebalancing conducted in January 2022, several index funds that were in the same asset class were sold, and the index fund for accumulation was consolidated into "eMAXIS Slim All Country Equity Fund." The money from selling the excessively increased stock index funds was used to purchase individual variable government bonds for 10 years, returning to the target asset allocation.

[Chart] Kenichi Minase's Portfolio Source: Random Walker of Umeyashiki Shopping Street (Practical Record of Index Investment) as of June 30, 2022 ――How often do you check your investment status and review your asset allocation?

Investment status is checked once or twice a month, and asset allocation is calculated twice a year, at the end of June and the end of December, with rebalancing done if necessary. The review of target asset allocation is done at most once every 5 to 10 years. Due to age considerations, I am thinking of increasing the bond ratio by about 10% over the next 10 years.

The amount of the contribution is almost fixed, but I have increased it by the raise about once every five years.

――How do you decide on the accumulation date?

I target areas that I think will become cheaper each month and decide my own investment days every month. Honestly, this hasn't improved my performance. I have previously compared the days I invested with the days when the lowest prices occurred within the month, and in the long run of my investment life, it was within the margin of error.

The reason I continue is that I find "BUY AND HOLD" to be boring. Since I am doing "manual accumulation," I must keep an eye on the movements of major stock indices and the foreign exchange market to some extent, which has become a bit of a mental exercise.

Only by continuing can the "compound effect accelerate"

――In the 20-year investment history, it seems that the value of assets held decreased by about half during the 2008 Lehman Shock. What were the factors that allowed you to continue accumulating in such circumstances?

Since I am investing in stocks, I naturally anticipate the risk of a decline in stock prices. During the Lehman Shock, the annual decline rate was within my risk tolerance at the time (-50%). However, there was a temporary loss that exceeded my expectations (-60%), and I cannot deny that it disturbed me.

Theoretically, stock price movements fall within a range of twice the portfolio's standard deviation with about a 95% probability. The Lehman Shock is a rare case that does not fall within that 95%, and considering that it is unlikely for such a situation to continue indefinitely, I strangely felt at ease. On the other hand, I reflected that I should have estimated my risk tolerance a bit more strictly. After that, at the timing of 10 years since I started index investing, I reviewed my asset allocation and raised the bond ratio from 20% to 30%.

――By calmly assessing your risk tolerance, you were able to stay in the market.

During the Lehman Shock, some of my index investment friends stopped investing. However, I believe that because I continued to invest for 20 years even when the market was declining, I was able to build a wealth of over 100 million. The compounding effect of investments accelerates after a certain period, so if you don't invest over the long term, it’s difficult to reap its benefits. I think index investing only takes shape when continued for a long time. "Perseverance is strength."

>> >>>【Part 2】"Creating a System that Generates Mental Flexibility" Why is a Steady Attitude Necessary for Long-Term Investment?

*This interview was conducted on September 12, 2022.

*This content is based on personal experiences and does not represent the opinions of our company.

*Please make your final investment decisions based on your own judgment and responsibility.