IT Money - Common cents in Japan
by Snejana Andjelkovic

"Common sense is not so common"? - Voltaire
This month, Computing Japan introduces a new column aimed at helping IT professionals and other expats living in Japan manage their personal finances. The first column looks at getting a handle on starting a savings and investment plan, courtesy of the investment experts at Magellan K.K.

We are constantly being reminded of how important it is to save as much money as possible. Nowhere is the message more apparent than in Japan, a country that boasts the highest level of personal savings in the world. But the situation is different for expatriates. Although expats generally receive better compensation packages than what is offered back home, they often do not know what to do with their money; which investment structure they should or could use, or even how to save. Living in Japan is expensive and everyone is usually so busy that years may fly by before the reality of how much you actually spend hits you. By the time you return home or get transferred somewhere else, you may not have put your private financial affairs in order.

So what can you do? First, sit down and define your objectives and priorities for retirement, education, a home purchase, or other significant goals in your life. Once this is done, the next step is to look at your disposable income, capital on hand, and the investment options that you are willing to consider.

Go offshore young man
Offshore investment savings programs offer access to top-managed mutual funds that can help you meet your requirements. Their structure is flexible enough to adapt to changes in your personal circumstances and provide a solid base for you to accumulate capital from wherever you are in the world. Investments can be made in the form of a lump sum or through regular monthly contributions, the latter of which will allow you to benefit from the dollar/ pound cost averaging effect.

Non-correlated funds
For risk-intolerant investors, alternative investments to stock market-correlated funds exist that will allow you to protect your capital. To give you an idea of what non-correlation means, consider this example: October 1987 was a devastating month for most investors as world stock markets witnessed a collapse that rivaled that of 1929. In the same month, the Tudor Futures Fund, which is a non-correlated fund managed by Paul Tudor Jones, registered an incredible 62% return! You may also wish to consider futures funds. Usually, the investment objective of these funds is to achieve substantial medium-term capital appreciation by trading a diversified portfolio of the world's equity index, bond, and financial commodities futures markets. They are designed to allow investors to profit from market fluctuations that occur throughout economic cycles - from boom to bust - and as such, should be the cornerstone of any portfolio. These funds take advantage of sophisticated trading techniques. Managed futures have experienced a phenomenal growth in the value of funds under management, rising from $300 million in 1980 to over $39 billion in 1998. Pension funds have contributed substantially to this increase, particularly since 1991, in an effort to reduce their dependence on rising stock or bond markets. This strategy has allowed them to outperform world stocks and bonds.

Aggressive investment without risk?
Investments in futures markets that do not expose your capital to risk do exist, and they have proved very successful!

The ED & F Man Group, established in London in 1783 and a leader in trading agricultural products and global futures markets, launched a guaranteed fund in December 1996 called Man IP 220 that has returned an amazing 62.7% net growth since inception (as of 30 June 1999). Since then, ED & F Man has launched a number of similar funds that are guaranteed by various banks, such as UBS, Bank of America, and Rabobank. The financial instrument they use enables them to guarantee 100% of your capital at a set maturity date, usually 9 years. Last year the industry saw a number of financial investment companies offering guarantees on capital over a 5-year period and underwritten by banks like Deutsche Bank or Chase Manhattan.

The opening bell rings - via the Net
If you wish to become an active participant in stock market trading by joining the ranks of amateur online traders, there are a few facts to keep in mind. Dr. Van K. Tharp, Ph.D., a research psychologist from the University of Oklahoma's Health Science Center, has developed a personal audit tool called the Investment Psychology Inventory, which is a test that measures personal traits correlated with winning and losing in stock trading. In his work with top traders, he discovered that they believe the following: a. Money is not important. b. It is OK to lose money in the markets. c. Trading is a game. d. Mental rehearsal is important for success. e. They have won the game before they start. So prior to allowing the fever of online trading to catch you, sit down, go back to the basics, and remember: common sense before common stocks!

Snejana Andjelkovic is an investment strategy advisor at Magellan K.K. Contact her at +813-3224-1717, or via e-mail to asset@magellankk.com.

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