The BOJ decided to raise its policy rate from around 1.0% to around 1.25%, and this article explains how people continuing to invest through the New NISA should sort their money now.
At its policy meeting on 18 September, the Bank of Japan decided to raise its policy rate from around 1.0% to around 1.25%. This raised the question of whether people investing through the New NISA should significantly change their investment policy. The view presented was that no major change is necessary if emergency savings and other reserves are secured and the current investment amount and equity allocation are consistent with the investor’s risk tolerance.
Whether to review asset allocation in response to the background of rising interest rates should be determined not by short-term market forecasts, but by whether the purpose and timing of the funds, or the range of price movements one can tolerate, has changed. It was also noted that investors should avoid emotional selling during a sharp decline and follow rules based on a predetermined asset allocation and investment policy.
As a way for New NISA investors to prepare by sorting their money, a four-part framework was proposed: daily expenses, emergency savings, funds needed within several years, and surplus funds. The view presented was that investment should basically be limited to (4) surplus funds. Emergency savings are often set at approximately 6 months to 1 year of expenses, although this can be adjusted depending on the individual’s circumstances.
Regarding currency hedging for foreign-currency investments, investors should decide for themselves whether to hedge. The emphasis should be on being prepared so as not to panic whether the yen strengthens or weakens. Hedging is a cost factor, and the fundamental preparation is to review the risk tolerance of one’s overall assets, according to the view presented.