It’s mainly you, not me
To be honest, I liked THEO from the start. They provide a very simple product, their interface is one of the best I have seen in Japan, and the customer service is speedy and thorough.
I’ve been putting money into my THEO account for over two years now, and I still like them a lot. However, there are several downsides I have become more aware of:
- no tax-loss harvesting
- the 1% fee doesn’t include fund fees
- no tax advantages
The biggest problem is that fee. 1% on top of the fund fees means you could easily do the same thing yourself, in a NISA account, and save yourself 1% a year. As I have said to THEO themselves several times, this is just too expensive for what they offer.
In December I published my annual progress report for THEO, and things are roughly the same now as they were then, but I have increased my monthly contribution to 50,000 yen. I will be keeping my account for now, but decided to close my wife’s one and invest directly in her ordinary broker account instead.
The process was extremely easy and simple (typical THEO, to be honest).
The process takes a couple of weeks before the money arrives in your bank account.
I am still planning to do at least one more annual update for my own THEO account at the end of this year and will decide what I am going to do with it then.
How about you? Anyone using THEO? Are you planning to continue?
I agree with this wholeheartedly. It is a great service if you don’t want to bother thinking about investments. Really easy to use but when NISA exists for tax-free investing, it doesn’t make much sense to use THEO.
I did it for a year just to experiment but closed my account last month. Will either start buying stocks or ETFs in my NISA account or increase monthly contributions to my iDeCo account.
I wonder how many Japanese are aware of NISA and iDeCo compared to the robo-advisers? I suspect the latter is more popular at present as it is ‘cooler’!
I suspect it isn’t robo-advisors vs. tax-advantaged accounts, but rather the fact that many people in Japan find investing difficult, frightening, and unsafe.
Last time I saw numbers for THEO they only had 13,000 clients with money in the system: http://www.retirejapan.info/blog/changes-at-theo
“…many people in Japan find investing difficult, frightening, and unsafe. ”
This is probably true.
My wife has just returned to work after a couple of years of being a stay-at-home-mum / mum-to-be. We’re about to open iDeCo and NISA accounts for her, and I bought her a couple of books to familiarize her with those types of account so that she didn’t just have to rely on my half-cocked explanations (I bought the Minako Takekawa one that is recommended here and a similar one for NISA).
She was reading the iDeCo one the other day and is eager to open her account, but she did say that she felt anxious when it got to the part in the book that explained about the stock market, shares, and the funds that you can buy through iDeCo. Her actual words were, “it’s really like a kind of gambling isn’t it?”
I explained to her that over long periods, the risks are negligible, and she trusts me, but I think she basically does feel quite nervous about the whole investing thing.
Anyone have a recommendation for *another* book that I might gift her to put her mind at ease?? I was looking at the Japanese version of “A Random Walk Down Wall Street,” but I haven’t actually read it myself.
Shame “Millionaire Teacher” isn’t available in Japanese…
I quite enjoyed ‘Okane no kyouyou’. It’s a short and simple read (my wife read it in a couple of hours) and written for a Japanese audience. Link from the Further Reading page (scroll down to Japanese books): http://www.retirejapan.info/further-reading.html
Yeah, she’s already read that. I bought it for her last year on your recommendation.
Hmm, between that and the Takekawa books, I’m out. I’ll have to find some more books in Japanese on this ๐
I really enjoyed ‘Random Walk’ but it’s not the first book I’d give someone on investing.
Well, I’m sure she’ll start to see how it all works once she jumps into it. In nay case, I think every investor probably has *some* degree of anxiety with regards to their investments.
I recommend some books written by Hajime Yamazaki (ๅฑฑๅดๅ ) for your wife.
I like Minako Takegawaโs books. But her books are only focused on the structure of iDeCo and NiSA and donโt help to clear the anxious of starting investment.
Hajime Yamazaki writes more wide vision of money on his books.
I think his books are more convincing to investment beginners.
My first choice for beginners are
โ้ฃใใใใจใฏใใใใพใใใใใ้ใฎๅขใใๆนใๆใใฆใใ ใใ!โ
http://amzn.asia/271ycUP
and
โใ้ใซๅผทใใชใโ
http://amzn.asia/gFEsFMk.
Thanks for the recommendations! I just ordered them -look forward to checking them out over Golden Week ๐
Those look promising—many thanks Yochan.
I just ordered “โ้ฃใใใใจใฏใใใใพใใใใปใปใป”
I’ve always loved William Bernstein’s book, The Four Pillars of Investing. It’s a great read as the writing is easy and sharp. It made me feel better getting started on investing. He’s also a very interesting character. They’ve published his book in Japanese:
https://www.amazon.co.jp/%E6%8A%95%E8%B3%874%E3%81%A4%E3%81%AE%E9%BB%84%E9%87%91%E5%89%87-%E3%82%A6%E3%82%A3%E3%83%AA%E3%82%A2%E3%83%A0%E3%83%BB%E3%83%90%E3%83%BC%E3%83%B3%E3%82%B9%E3%82%BF%E3%82%A4%E3%83%B3/dp/4797321210/ref=sr_1_5?s=books&ie=UTF8&qid=1523659307&sr=1-5&refinements=p_27%3A%E3%82%A6%E3%82%A3%E3%83%AA%E3%82%A2%E3%83%A0%E3%83%BB%E3%83%90%E3%83%BC%E3%83%B3%E3%82%B9%E3%82%BF%E3%82%A4%E3%83%B3
Hope that helps
Thanks for the suggestion Rochelle–I’ll check that out!
I have been thinking about closing my own Theo account for a few months already. Still haven’t done it, but the reasons are not missing:
– 1% management fee is considerably high.
– Transactions are too numerous and do not make sense – instead of just buying new assets to rebalance the portfolio, they just sell and buy uselessly.
– Exchange rate used to convert is way too much to their advantage
– It is hard to properly keep track of everything (dozens of transactions every month).
– The funds (or equivalent ones) can be bought on any broker.
So yeah, I’m thinking about moving all this to Rakuten and manage it myself. Rebalancing should be as easy as an Google Spreadsheet anyway. Other thoughts on this?
By the way, can you report on how long it took for them to sell your assets after you closed your account? You mention that it takes a couple of weeks before the money reaches your account (!), but I am interested when the funds are actually sold, so I can buy the same amount elsewhere at the same time.
Also interested to know whether what you got back corresponds to the actual value that was displayed on the site. ๐
I’m afraid I wasn’t really paying attention beyond ‘need to close account, account is closed, money has arrived in account, done’.
I’m a lazy, big-picture type of person ๐
Doesn’t the screenshot above show the final value of your wife’s account? ๐
You could backtrack if the same amount made it to your bank account.
Since I’m considering to close my Theo accounts, I’m also interested if it’s going to be “what you see is what you get”…
It would do, if I had thought of writing this post a month ago when I closed her account…
That is my account, just to show the menus.
I’m sure the info is buried somewhere in the documents in my wife’s account, but I don’t care enough to go looking for it ๐
Same here, considering to close our two Theo accounts. The 1% fee on top of fund fees are too much, in-transparent exchange rate and the fact that it takes them 10 days to withdraw the money, are some of the reasons.
Apart from that I don’t quite agree with their portfolio allocation. For example they completely ignore Europe or emerging markets are under-allocated. The whole allocation could be pretty much mimicked by buying a single MSCI ACWI ETF fund for TER 0.15%, instead of approx. 1.5%.
I decided that Robo-advisors at 1% are much too expensive for something I can do myself. Instead, I choose my own funds in Rakuten and Interactivebrokers (IB).
The advantage of IB is that
– you can switch languages (Jp, Eng, Fr, Esp …),
– you have a huuuge number of funds (many of which are not available with Japanese brokers),
– you have Tokyo-based Japanese or English telephone support, or chat (in English)
– you are protected by US securities law up to $500,000 investments (Japanese brokers are only protected up to 10million yen, like the banks),
Downsides are:
– you have to do your own tax reporting (print out your gains and your costs (10% taken by the US) every year.
– no IDEKO or NISA
Another disadvantage of IB is that they may charge you an account inactivity fee each month. This is up to USD10 per month (any trade-generated commission is subtracted from this). So if you’re not very active and simply holding long-term ETFs then you will be charged up to USD120 per year.
Note that the fee is waived if your account balance exceeds USD100,000.
I can’t come up with any service they could provide that would justify that 1% cost.
I mean, that’s 10,000 for every 1mil invested that they take for what is essentially entirely automated. Since I haven’t opened a robo-advisor account I can’t see how it’s run, but other comments about frequent trading do not sound encouraging.
Did you ever compare the one year returns in theo(minus all the trading costs) to the returns of some major indexes? That’s something I’d like to see.
No, but I’d be happy to run a guest post if anyone wants to give that a go!
Never thought that I would hear this coming from you, Ben ๐
That said, any additional income can now be diverted to an automatic DCA plan into Rakuten’s Vanguard (VT) wrapper fund.
Our future selves will thank us for the cost savings.
Well, I haven’t closed MY account yet ๐
But I suspect I will after this year.