What can American investors learn from Japanese investors during lost decades?

[Odysseusa]

http://www.theglobeandmail.com/globe-in ... le2175211/

Strategy
Lessons for investors from Japan's lost decades
nicolas johnson
From Thursday's Globe and Mail
Published Wednesday, Sep. 21, 2011 7:30PM EDT
Last updated Thursday, Sep. 22, 2011 6:39AM EDT



Japan’s experience also suggests that many asset classes considered to be havens are far from bulletproof.

1. Real estate, for instance, proved to be a horrible bet for Japanese investors. The average price of residential land in Japan has fallen 60 per cent since the Nikkei 225’s record high, declining every year since 1992.

2. The domestic stock market proved even more disappointing. All 33 industry groups in Japan’s broad Topix index of more than 1,600 companies declined over the past two decades. While a handful of companies such as Canon Inc. and Honda Motor Co. posted gains, it would have taken an astute fortune teller to pick those stocks out from among the hundreds that steadily lost value.

3. Some assets did far better. Investors would have more than doubled their money by buying Japanese government bonds, as interest rates kept creeping lower. (Bond prices move up as interest rates fall.)

4. Japanese investors could also have prospered by venturing abroad. Someone who bought the S&P 500 in 1989 and held those stocks until today, would have nearly tripled their money in yen terms.

5. Precious metals, too, would have been lucrative. Gold moved sideways or down through the 1990s, before beginning an ascent in 2001 that would have more than doubled a Japanese investor’s wealth in yen terms.

6. Even just stuffing money under the futon would have worked out pretty well for Japanese investors as deflation amplified the buying power of cash.

The lesson? Broad diversification works.

A Japanese investor who held government bonds, foreign stocks, precious metals and cash, in addition to domestic shares, would have blunted the Nikkei’s fall and even earned a profit. That may not be the most exciting take-away from Japan’s experience, but it’s one time-tested result that investors should keep in mind as they seek a refuge from today’s market weakness.

[craigr]

Thanks for the link.

[Lone Wolf]

Nice find. 

Having said that, I'm still sticking with US stocks!