With the spread of the new NISA, the idea that “investing means index investing” has become common sense.
Low-cost, easy-to-use options like “All-Country” and “S&P 500” seem like the right answer for many investors.
Yet, precisely because everyone is looking in the same direction now, there is someone who dares to sound the alarm about its “blind spot.”
That person is Ryu Sawakami, President and CEO of Sawakami Investment Trust Co., Ltd.
This article, based on Mr. Sawakami’s analysis, explains the risks lurking behind the index boom and the true essence of “active management” – precisely what is needed in the turbulent times ahead.
1. Is the Index Investment Boom a Government-Driven Trend?
The market is currently experiencing an unprecedented boom in index investing.
However, Mr. Sawakami analyzes this situation as having a strong “government-driven” aspect.
- Institutional Support
The Financial Services Agency’s recommended “long-term, regular savings, and diversification” guidelines, along with the NISA savings plan itself, are designed with index investing as a fundamental premise. - Impact of Tokyo Stock Exchange Reforms
In response to requests from the Tokyo Stock Exchange to improve PBR (price-to-book ratio), companies have intensified share buybacks.
This has lifted the overall index, supporting the performance of index-based investments.
一見、盤石に見えるこの流れですが、「政策や制度によって作られた流行」には、いつか転換点が訪れる可能性を秘めています。
2. The Hidden Concern of “Market Collapse” in Index Investing
What Mr. Sawakami fears most is index investors’ “indifference to their investment targets.”
Index investing focuses on “indices (numbers)” rather than corporate vision or value.
Consequently, many investors fixate solely on price fluctuations.
The Risk of “Thinking Stopping”
What happens if a global economic crisis or major market correction strikes?
Investors lacking a rationale (a conviction) for why they invested in a particular company risk being unable to withstand price declines. They may rush to pull their money out of the market en masse, triggering a “sell-off.”
If this becomes reality, the market would collapse entirely, halting the shift from savings to investment that has finally begun to take root in Japan.
Mr. Sawakami strongly fears that investing could revert to its negative image as “gambling.”
3. The Power of Active Management Shines Brightest in Turbulent Times
So why should we reconsider active management now?
The reason lies in the “uncertainty” of the current global situation.
- The Normalization of Geopolitical Risks
Unpredictable events continue to unfold: U.S.-China tensions, unending conflicts, and presidential elections across nations. - The Limits of Index Investing
Index investing—mechanically buying all companies in an index—means holding onto declining firms and those carrying risks as well.
The True Value of Active Management
The essence of investing lies in “carefully selecting companies whose future value will increase and riding their growth.”
When markets are in turmoil, an “active perspective”—thoroughly assessing corporate fundamentals and investing only in truly strong companies—becomes the most powerful weapon for protecting and growing your assets.
Summary: Where Does Your “Vote” Go?
Index investing is an extremely efficient and convenient tool, but Mr. Sawakami poses a question to investors:
“Are you conscious of where you are investing your precious funds?”
Rather than thinking “It’s safe because it’s an index fund,” invest your money in companies you want to support, in things you believe are necessary for the future of society. This “intentional investing” is the wisdom needed to navigate uncertain times.
Shift from investing that reacts to mere “index fluctuations” to investing that resonates with corporate values.
Now is the time to reconsider your own approach to investing.
