[August 12] Nikkei 225 +0.83% but Japanese Stock PF -0.73% ~Facing the Risk of Concentration in Specific Stocks~
When you continue investing, you sometimes encounter strange phenomena. The entire market is buzzing with activity, yet your own assets are quietly dwindling. Today was exactly one of those "frustrating" days.
I would like to take a deep look back at today's market overview, which was a bit unusual and contained many lessons, as the trends of the US and Japanese market indices and my own portfolio (PF) moved in completely opposite directions, and the significant challenges in my portfolio that were revealed as a result.
📊 Today's Market Overview and Portfolio Performance: A "Strange Reversal" in the US and Japan
First, let's calmly confirm this "opposite development" with numbers.
Index/PF Performance US Market (8/10)Dow Jones Average-0.34% US Stock PF +1.13%(*Slightly adjusted from the previous +1.64% to reflect the trend)Japanese Market (Today)Nikkei 225+0.83% Japanese Stock PF -0.73%
The contrast in these numbers is very interesting.
In the US market the day before yesterday, the Dow Jones Average had a lackluster performance of -0.34%. While major indices were soft, my US stock portfolio would normally have been dragged down as well, but the result was a significant counter-trend gain of +1.13%. It resisted the market waves and showed its own unique strength.
However, in today's Japanese market, where I expected to carry over that good momentum, the exact opposite phenomenon occurred. The Nikkei 225 was bought firmly at +0.83%, and gains were seen in many sectors. Despite this, my Japanese stock portfolio fell by -0.73%.
In the US, it was "market average loss, PF gain," and in Japan, it was "market average gain, PF loss." It was a strange day where the movement of the entire market and the movement of the PF were reversed in both the US and Japan, which felt a bit disjointed mentally.
🔍 Today's Review and Individual Stock Trends: The Pain Caused by Specific "Core Stocks"
Why did my portfolio go down even though the market was up? The cause is extremely clear. The sharp drop in some core stocks completely canceled out the gains of other stocks, dragging the entire portfolio into the abyss.
Let's look at the movements of individual stocks that had a particularly large impact.
📉 The Decline That Became the Portfolio's "Achilles' Heel": Sanrio and Mitsui High-Tec
Today, the decline of these two stocks had a major impact. Sanrio, in particular, had been an "honor student" that drove the portfolio with the strength of its IP (intellectual property), but today it showed a severe decline, perhaps pushed by profit-taking sales.
However, my biggest reflection for today lies in another stock.
🚨 The True Nature of the "Concentration Risk" That Was Highlighted: Mitsui High-Tec
Above all, the decline of Mitsui High-Tec once again brought the structural challenges of my portfolio management into the light.
The company is a highly technical enterprise with a global share in core components for EVs (electric vehicles) and semiconductors, such as motor cores and lead frames. I highly valued its future potential, and I have held the stock for a long time, expecting it to be a "core" holding.
The problem is that that "expectation" had, at some point, turned into "dependence."
Currently, the number of shares of Mitsui High-Tec in my Japanese stock portfolio is disproportionately high, and its composition ratio (weight) has become too high. As a result, the structure was such that even a slight fluctuation in the company's stock price would sway the profit and loss of the entire portfolio, for better or worse.
When a company's stock price falls sharply against the overall market trend, as it did today, the damage to the entire portfolio becomes so severe that it cannot possibly be covered by the gains of other stocks. I have painfully realized that believing in the 'earning power' of a core stock and exposing one's entire assets to its 'volatility' are two completely different issues.
💡 Impressions and future investment policy: Abandoning 'blind faith' in core stocks and moving toward appropriate rebalancing
Seeing one's assets decrease while the overall market is rising is an incredibly frustrating experience for an investor. There are moments when I feel pessimistic, thinking, 'The Nikkei is up, so why am I the only one...'
However, I believe that when such 'market divergence' occurs, it is the perfect opportunity to discover the inherent vulnerabilities of one's portfolio and review the core of one's investment strategy.
Even for a stock I expect to be a core holding, if my dependence on that single stock is too high, it will extremely increase the volatility of the entire portfolio. This is equivalent to voluntarily abandoning the effect of 'diversification,' which is the foundation of investing. While I still trust in Mitsui High-tec's technological capabilities and future potential, I need to calmly reconsider its 'role' and 'size' within my portfolio.
Future policy: Adjusting the position size of core stocks
Based on these results, I will organize the following investment policies.
Facing the volatility of core stocks For stocks like Mitsui High-tec, which have high growth potential but extreme price fluctuations, I will constantly monitor the impact of their volatility on the entire portfolio and reconfirm whether it remains within an acceptable risk range.
Rebalancing to an appropriate position size While assessing future earnings trends and market conditions, I will consider adjustments (rebalancing) to reduce my concentration in Mitsui High-tec. By selling a portion of my holdings and moving funds to other diversified assets with strong performance, I will reduce my dependence on a single stock and increase the stability of the entire portfolio.
Investing requires a balance between an 'offensive' stance of believing in corporate growth and a 'defensive' stance of protecting assets. Applying the lessons learned this time, I will patiently and carefully revise my investment policy, aiming for a more robust portfolio where volatility can be controlled.
Today was a bit painful, but it was a day that provided even more valuable 'realizations.' Why don't you also take a calm look at the 'composition ratio' of your own portfolio from time to time?
May we all be able to discern the essence of the market and make calm, good investments tomorrow as well.
⚠️ Investment risks and disclaimers
This article is a diary (miscellaneous notes) recording personal investment results and thought processes, and it does not recommend or solicit the buying or selling of specific stocks or investment methods. Stock investment involves risks such as price fluctuation risk, credit risk, and currency risk, and there is a possibility that the principal investment may be lost. Furthermore, managing assets by concentrating them in specific stocks increases the volatility of the entire portfolio and carries the risk of magnifying losses. Please make final investment decisions based on your own judgment and responsibility, taking into account the market environment, your own asset situation, and risk tolerance. I assume no responsibility for any damages incurred based on the information in this article.
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