Nikkei with reinvested dividends

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aaaaaaabbbbbbbbbb
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Nikkei with reinvested dividends

Post by aaaaaaabbbbbbbbbb »

Japan's stock market is often brought up as an example of how it is not guaranteed that the market will rebound, even after decades. But what if you had reinvested dividends? I can find plenty of Nikkei 225 charts, but none that simulate the growth of your investment if you had reinvested dividends.
Micks
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Re: Nikkei with reinvested dividends

Post by Micks »

This site shows historical return for Nikkei 225 total return index (which includes the stock market collapse and subsequent lost decade(s), but is in Canadian dollars. The effect for a Japanese investor would be dramatically different due to currency fluctuations.

You can see the last 10 years charted here. Maybe the Japanese bogleheads here can help you out further.
Kind regards, Mick
Topic Author
aaaaaaabbbbbbbbbb
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Re: Nikkei with reinvested dividends

Post by aaaaaaabbbbbbbbbb »

Actually, your second link answers my question ("The index was first published on December 3, 2012. The inception value was 6569.47 points on December 28, 1979 (base date; the value identical to the Nikkei 225 closing on the day)."). So the CAGR of the Nikkei 225 total return during the 35.5 years since December 28 1979 is (29462/6569)^(1/35.5) - 1 = 4.32%. Inflation over that period was a mere 40%, which gives us a real CAGR of 3.33%.

Your first link tells us the Nikkei 225 total return had a nominal CAGR (in CAD) of 4.5% from 1984 to 2014. The CAD underwent inflation of 100% over that period, so adjusting for that inflation (and ignoring exchange rate fluctuations) you had a real CAGR of 2.11%. Of course the starting point (1984) is midway through the massive bubble of that decade, and the price-weighted Nikkei 225 is a flawed summary of the total Japanese stock market.

I'd be interested to see the inflation adjusted dividends-reinvested IRR for a portfolio created by investing x yen every month into the Nikkei 225 (or even better a total Japanese stock market index fund) starting in (say) 1970 until the present day.
Micks
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Re: Nikkei with reinvested dividends

Post by Micks »

Yes, I too would be interested in seeing an IRR calculation. I am just not sure what you would want to do with the outcome, the chance of it repeating would be quite small of course. The factsheet of the total return index shows on the second page what the yearly impact of including dividends is and what the yearly return of the Nikkei 225 has been.

You may want to check out the Credit Suisse Global Investment Returns yearbook as well and look up Japan there (p.47 in the 2015 version). I found it quite illustrative.
Kind regards, Mick
longinvest
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Re: Nikkei with reinvested dividends

Post by longinvest »

bpp updates this total-return chart yearly:

viewtopic.php?f=10&t=23036&start=100#p2379273
Image
Last edited by longinvest on Thu Apr 12, 2018 7:04 am, edited 1 time in total.
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Topic Author
aaaaaaabbbbbbbbbb
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Re: Nikkei with reinvested dividends

Post by aaaaaaabbbbbbbbbb »

Micks wrote:Yes, I too would be interested in seeing an IRR calculation. I am just not sure what you would want to do with the outcome, the chance of it repeating would be quite small of course. The factsheet of the total return index shows on the second page what the yearly impact of including dividends is and what the yearly return of the Nikkei 225 has been.

You may want to check out the Credit Suisse Global Investment Returns yearbook as well and look up Japan there (p.47 in the 2015 version). I found it quite illustrative.
The reason I want some IRR calculations is that they would (in my mind) settle whether Japan really is a counterexample to the common claim that "the stock market always goes up in the long-run." The positive real CAGRs (for a 100% domestic stock portfolio no less) I calculated earlier suggest that Japanese stock market performance hasn't been quite as atrocious as some people make it out to be (unless the entirety of your retirement strategy was to make a single lump-sum investment in 100% equities at the peak of the biggest bubble ever). But what I really want is to see 40 years of dollar cost averaged investing and then 25+ years of dollar cost averaged withdrawals.

Though I'm too lazy to run the numbers myself.

----

bpp says the blue line is the TOPIX with reinvested dividends, but after performing a highly precise eyeing of charts I looked up on google images, the blue line looks awfully similar to the TOPIX without reinvested dividends.
bpp
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Re: Nikkei with reinvested dividends

Post by bpp »

aaaaaaabbbbbbbbbb wrote: bpp says the blue line is the TOPIX with reinvested dividends, but after performing a highly precise eyeing of charts I looked up on google images, the blue line looks awfully similar to the TOPIX without reinvested dividends.
It is with dividends reinvested, and inflation corrected.

Here are the raw numbers for the total return index:
http://www.jpx.co.jp/english/markets/in ... ie1503.pdf
My plot uses the data from the first column, then applies a Japanese CPI correction to get real returns.

Note that inflation and dividend yields have both been low over that period, so it won't look dramatically different from the nominal price index anyway.
Valuethinker
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Re: Nikkei with reinvested dividends

Post by Valuethinker »

bpp wrote:
aaaaaaabbbbbbbbbb wrote: bpp says the blue line is the TOPIX with reinvested dividends, but after performing a highly precise eyeing of charts I looked up on google images, the blue line looks awfully similar to the TOPIX without reinvested dividends.
It is with dividends reinvested, and inflation corrected.

Here are the raw numbers for the total return index:
http://www.jpx.co.jp/english/markets/in ... ie1503.pdf
My plot uses the data from the first column, then applies a Japanese CPI correction to get real returns.

Note that inflation and dividend yields have both been low over that period, so it won't look dramatically different from the nominal price index anyway.
A key point. As I recall at the peak of the Japanese bubble, the stock market was paying something like 0.5% dividend yield. It may even have been illegal then for Japanese companies to do share buybacks, but in any case they were certainly unheard of (and far less common today than in Anglo Saxon markets). It was an era when the Bank of Japan (or at least Nomura) seemed tell stock prices what they should be, and they obeyed.

I believe that if you strip out Tepco, the owner of the Fukushima Daiichi reactors which melted down, that even now the Japanese market pays a fairly low yield? At least compared to European standards (still over 3.0%)).

Less than 1% pa for 25 years will still change your numbers, a lot, with compounding.

The consensus on Japan seems to be that for many Japanese, the fall in housing prices and stock markets has been tolerable, because falling consumer prices have improved real purchasing power (add in improvements in quality that CPI has trouble catching eg an Apple now vs. then, and the situation is even better)? The losers have been those who became unemployed or were unable to get secure jobs- they have been marginalized?
BahamaMan
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Re: Nikkei with reinvested dividends

Post by BahamaMan »

longinvest wrote:bpp updates this total-return chart yearly:

viewtopic.php?f=10&t=23036&start=100#p2379273
Image
Very Interesting Chart Longinvest ! --- Should give those some pause that advocate 100% Stocks for the long haul !
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