The value of money varies greatly by country: 'The same 10,000 yen' is completely different between developed and developing countries

Hello! I am TAKA Chan, an individual investor.

To start with the conclusion, this is a fact.
However, as an investor, you must not stop your thinking here.

Conclusion: The difference in purchasing power really exists

In economics, there is a concept called 'Purchasing Power Parity (PPP)'.

It is a way of measuring the value of a currency based on how many goods and services you can actually buy in that country, rather than by the exchange rate.

For example,

• in Japan, 10,000 yen covers dining out or daily necessities

• in a country with low prices, it can cover rent or the majority of living expenses

in some cases.

This is a fact that has also been confirmed by data.

This is the pitfall

'Low prices' = 'Investment appeal'?

That is not the case.

Developing countries have

• currency depreciation risk

• hyperinflation risk

• political instability

• capital controls

• Underdeveloped legal systems

and other structural risks exist.

Even if the 'living value' of 10,000 yen is high,safety as capital is a separate issue.

Growth rates and returns do not match

Emerging countries often have high GDP growth rates.

However,

• the fruits of growth do not belong to shareholders

• there are many state-owned enterprises

• the stock market is immature

• dollar-denominated returns disappear due to currency depreciation

are not rare cases.

What investors should look at

is not the growth rate, but the return on equity (ROE) and the reliability of the system.

So why is the 'difference in the value of money' important?

It is because

• there are countries where even small amounts of capital can move the market

• there are countries in the early stages of consumption expansion

• there are countries with significant room for financial inclusion

this 'asymmetry' exists.

In other words,the risk is high, but the initial angle of return is also steep.

This is where investment opportunities arise.

We must not forget the strengths of developed countries either.

On the other hand, developed countries have

• stable legal systems

• currency reliability

• deep capital markets

• liquidity

• shareholder protection

as advantages.

That is why there is a reality where dollar-denominated assets serve as the world's reserve currency.

Even if the 'living value of money' is low, the 'safety value of capital' is high.

It is important to understand this difference.

The answer as an investor

What is important is not a binary opposition.

• countries with high living value

• countries with stable capital value

How to combine these. A portfolio is
the design of this balance itself.

Summary

Money is not just numbers.
However, it is not just emotion either.

It is

• Purchasing power

• Currency credibility

• System

• Growth rate

• Shareholder returns

are the combined results of these.

Even with the same 10,000 yen, the value is different. However, investors need to look at the underlying structure.

When your perspective on the world changes, the placement of your capital changes as well.

Will your money go after "living value"? Or will it go after
"capital safety"?

Or, is it both?

I have started a note for individual investors. With a few exceptions, it is published almost entirely for free.