Volatility vs permanent loss, the main types of risk, and how to translate a stock allocation into a possible yen loss.
Risk is not one thing: volatility is temporary fluctuation, while permanent loss is different. The practical question is whether you could hold a plan while a ¥10m portfolio temporarily fell to ¥6m.
Market risk is the broad rise and fall of prices. Company (specific) risk is a single issuer failing — diversification reduces it. Credit risk is a borrower defaulting. Liquidity risk is being unable to sell at a fair price when you need cash. Currency risk is exchange-rate movement changing the yen value of foreign assets. Inflation risk is purchasing power eroding even without a nominal loss.
A crucial distinction: volatility is a temporary change in value that may reverse, while permanent loss (a bankruptcy, or selling at the bottom) is not recoverable. Diversification and time address volatility far better than they address a permanent, concentrated bet that fails.
Three separate ideas govern how much risk to take. Risk capacity is your financial ability to withstand loss — a young worker with secure income has high capacity; a retiree drawing down has low capacity. Risk tolerance is your emotional willingness to endure a fall without abandoning the plan. Risk need is the return your goal actually requires.
A portfolio should normally be constrained by the lowest of the three. Someone with high capacity but low tolerance who sells in every crash is effectively a low-tolerance investor, and should size equities accordingly.
Labels like "moderate" or "aggressive" are less useful than a concrete calculation. Assuming equities fall 50% in a severe market (before bond or currency effects), the approximate portfolio decline is: 20% equity → about −10%; 40% equity → about −20%; 60% equity → about −30%; 80% equity → about −40%; 100% equity → about −50%.
Now make it personal. Would a ¥10m portfolio temporarily falling to ¥6m (a 60% equity mix) cause you to abandon the plan and sell? Recoveries are asymmetric too: a 30% fall needs a ~43% gain to return to breakeven, and a 50% fall needs a 100% gain. If the honest answer is "I would sell," reduce the equity share until the modelled loss is one you could hold through.
Brokerage (NISA/iDeCo) · Rakuten Securities
A leading low-cost brokerage for NISA and index-fund investing, integrated with Rakuten points and Rakuten Bank.
Fees: Many domestic funds and trades are low- or no-commission — verify current fee schedule.
Brokerage (NISA/iDeCo) · SBI Securities
Japan’s largest online brokerage by accounts, with a very broad low-cost fund lineup and full NISA/iDeCo support.
Fees: Many trades and funds are low- or no-commission — verify current fee schedule.
Brokerage (NISA/iDeCo) · Monex
An established online brokerage often chosen for US-stock access and research tools, with NISA and iDeCo support.
Fees: Commissions vary by product; some funds/trades are low-cost — verify current schedule.
This is education, not a recommendation. Most beginners research low-cost, broadly diversified index funds — for example all-country (全世界株式) or S&P 500 trackers — rather than picking individual stocks, because low fees and diversification are within your control while returns are not. Understand that values fall as well as rise, match the risk to your time horizon, and never invest money you may need soon.