S&P 500 vs. Nikkei 225: A Long-Term Investment Perspective

S&P 500 vs. Nikkei 225: A Long-Term Investment Perspective

Introduction

Hello, investors! 🌱

Many investors often wonder which index fund to invest in. Today, instead of discussing the Korean stock market, let’s focus on comparing two major indices: S&P 500 and Nikkei 225. This blog summarizes insights from a discussion between two investment experts who support each index. We will analyze their characteristics, economic cycles, and exchange rate factors to determine which might be the better long-term investment.

S&P 500: The Benchmark of Stability and Growth

The S&P 500 consists of 500 leading U.S. companies, making it one of the most stable and growth-oriented indices. One of the experts interviewed allocates 99% of their portfolio to an S&P 500 index fund, calling it “the best choice after thorough research.”

Why S&P 500?

Growth Drivers:

• Continuous population growth due to immigration
• Flexible corporate restructuring (including layoffs)
• High consumer demand in the U.S.

Historical Performance:

• Except for stagnation in the 1960s-80s, the index has shown consistent growth over the last 30 years.

Pros ✨
✅ Stable growth backed by global giants like Google, Apple, Amazon, Microsoft, and Meta ✅ Benefits from currency exchange—a weaker home currency increases returns in foreign investments ✅ Diversification—500 companies help spread risk

Risks ⚠️
🚨 Overvaluation concerns—high stock prices may increase the chance of a market correction 🚨 Political instability—anti-immigration policies, political polarization (e.g., Trump’s policies) could impact economic stability 🚨 Inflation—aggressive fiscal spending could lead to hyperinflation

Future Outlook 🔮
Expert A predicts that S&P 500 will continue to outperform over the next 20 years due to ongoing U.S. economic growth. Additionally, a weaker local currency (potential USD/KRW 200+) may further boost returns. A dollar-cost averaging strategy could mitigate risks while maximizing long-term returns.

Nikkei 225: The Comeback Story?

Why Is Nikkei 225 Gaining Attention?
The Nikkei 225, Japan’s premier stock index, is showing signs of entering a long-term growth cycle. One expert suggests that since 2013, Japan has entered a 40-year bull cycle, potentially leading to a 300,000 yen index by 2050.

Cycle Analysis:

• Began a 40-year upward trend in 2013, expected to last until 2053
• Past bullish cycles have seen 200-300x growth
• Currently at ~40,000 yen, potentially reaching 400,000 yen if similar growth patterns continue

Pros ✨
✅ Early growth phase—getting in early could yield significant returns ✅ Economic recovery—supply chain reconfiguration and Japan regaining financial hub status ✅ Moderate projections—inflation-adjusted expectations make 300,000 yen a reasonable target

Risks ⚠️
🚨 Structural issues—aging population and low birth rates may slow economic growth 🚨 Speed of innovation—Japan’s AI and automation adoption lags behind 🚨 Currency risk—a weaker yen could impact returns for foreign investors

Future Outlook 🔮
Expert B believes that Nikkei 225 will outperform in 20 years, supported by economic recovery and a stable yen (~150 JPY/USD as the new normal). If Japan addresses its structural challenges, it could unlock immense growth potential.

Who Will Win in 20 Years?

Comparison Summary

Feature	S&P 500	Nikkei 225
Growth	Strong global growth	Potential resurgence
Stability	Diversified, resilient	Emerging from stagnation
Currency Advantage	Favorable for foreign investors	Risk of yen fluctuations
Long-Term Risk	Overvaluation, political instability	Aging population, slow automation

My Recommendation 💡

I recommend a 50-50 split investment strategy:

📌 Why?

• S&P 500 provides stability and global exposure.
• Nikkei 225 offers potential upside from Japan’s economic revival.
• Diversifying across both markets reduces risk from currency fluctuations and market downturns.

While Expert A is fully committed to S&P 500 and Expert B is all-in on Nikkei 225, I believe balancing both is a practical and rational approach.

Final Thoughts: Balancing Conviction and Flexibility

Both experts present compelling arguments—S&P 500 is historically dominant, while Nikkei 225 is potentially entering a major growth phase. Investment decisions should be based on individual risk tolerance, market insights, and diversification.

What do you think? Are you team S&P 500, team Nikkei 225, or a believer in diversification? Share your thoughts below! Let’s look back at this post 20 years from now and see how our insights hold up! 🚀

Invest wisely, and happy investing! 💪

(This blog post was inspired by expert discussions from a YouTube investment panel.)