by Noriyuki Morimoto
Asset formation is not an absolute necessity, but rather a means to achieve a more prosperous, better, and enjoyable life. Asset formation for retirement is also positioned as a self-help effort to maintain a prosperous retirement life, based on the premise that the function of public pensions will inevitably decline to ensuring minimum living standards in a super-aging society.
In investment education related to asset formation, taking risks in investment is considered more or less a given. However, the premise for being able to take risks is that a certain gap between the target amount and the actual amount of assets does not pose a serious problem. In contrast, funds that are strictly essential for living cannot be exposed to investment risks. The risk of fluctuation is only acceptable in terms of the degree of affluence in life, not in terms of the necessities of life.
For example, if you wish to take a luxurious trip in a few years and start building assets for that goal, thinking through the investment strategy and taking some risks can be fun and enjoyable. If it goes well, you can indulge yourself even more on the trip or go sooner than planned. Incorporating such uncertainty into the joys of life should be the true meaning of taking risks in asset formation.
Of course, you shouldn’t take risks that could make the trip itself impossible, but lessons like this are things you learn through experience. Even if you fail, it’s just a leisure activity. You don’t need to force yourself to go. Therefore, even if asset prices happen to decline during the period when you had planned to travel, there is no need to sell your assets and force yourself to convert them into cash. Instead, you should postpone the trip, continue building your assets, and take the possibility that asset prices will recover significantly, allowing you to take a more luxurious trip than originally planned.
Risk is uncertainty—both good and bad. Through such thrilling experiences, which are the essence of entertainment—the mix of anxiety and anticipation—we gradually come to understand the true meaning of risk and long-term perspectives. To learn about investing, as with all types of learning, it is essential to find joy and enjoyment in the process.
[Category /Personal Asset Management]
Chief Executive Officer, HC Asset Management Co.,Ltd. Noriyuki Morimoto founded HC Asset Management in November 2002. As a pioneer investment consultant in Japan, he established the investment consulting business of Watson Wyatt K.K. (now Willis Towers Watson) in 1990.