1-3 Risk and Return of the Main Products
A page comparing deposits, bonds, equities, and REITs on the same axes, and sorting out the role each plays in your finances
1-2 sorted out how to look at return and risk. Next, compare the main products on the same axes. Holding the same ¥1,000,000, some products barely move at all — like deposits — while others swing widely, like equities and crypto.
- Look at a past chart to picture the range of movement, not to guess which product will grow most next.
- What to look at first is not the ranking of outcomes but how much it moves up and down.
- Each product has a broad tendency in where its return comes from and how much it moves.
- Deposits and bonds tend to take the protective role; equities and REITs the long-term growth role.
- The name "mutual fund" or "ETF" tells you nothing about its character — look at what is inside.
1. On a chart, look at the movement rather than the ranking
The chart below is a reference example indexing month-end values of the main products with end of April 2021 = 100. The first thing to look at is not which product grew most. Returns change a great deal depending on the window you cut. Gold or crypto may stand out over one period, while equities or REITs look stronger over another.
How much a product moved along the way, and how far it fell, does follow a tendency per product. On a chart, look at how much a ¥1,000,000 holding is likely to move up and down, rather than what grew most. Some products drift up to ¥1,030,000; others climb near ¥1,500,000 and then fall into the ¥800,000s. For long-term investing, how far it falls along the way — and whether you can absorb that — matters more.
2. Sort the differences into low, medium, and high
You do not need to memorise precise figures for each product at the start. Rounding them to low, medium, high is more intuitive.
Risk and return of the main products
| Product | Return | Risk | Where the return comes from |
|---|---|---|---|
| Deposits | Low | Low | Interest accumulating over time |
| Developed-market bonds | Low | Low | Coupon income, plus support when the economy weakens |
| REITs | Mid | Mid | Rental income and recovery in the property market |
| Equities | Mid | Mid | Growth in corporate earnings, plus dividends |
| Gold | High | Mid | Safe-haven demand during currency stress, inflation, and geopolitical risk |
| Commodities | High | High | Rising resource prices and a link to inflation |
| Crypto | High | High | Expectations of adoption and supply-demand driven price moves |
Deposits and bonds
Deposits and bonds are the easiest to grasp. A deposit grows a little at a time through interest, with almost no movement. Bonds are also interest-centred, but because they respond to rates and the economy, they move more than deposits.
Equities and REITs
Equities and REITs move more than deposits and bonds. For equities, return centres on company growth, rising profits, and dividends, and they respond strongly to the economy and earnings. REITs offer rental income and distributions, but because they respond to the property market and interest rates, they move up and down for somewhat different reasons than equities.
Mutual funds and ETFs
Mutual funds and ETFs bundle products such as equities and bonds into a single basket. So the label "mutual fund" does not by itself determine its risk and return. A global equity fund moves much like equities; a bond-centred fund moves much like bonds. When comparing, look not at whether it is a fund but at what it holds and in what proportions.
Gold, commodities, and crypto
These are products where the price movement itself is central, rather than accumulating interest or dividends. They can rise sharply, but they also fall sharply, so unless you are clear about why you hold it, the movement will push you around.
That gives you the axes for viewing the main products side by side. Chapter 2 goes deeper into equities — the one most people put at the centre of long-term investing.