Progress Report 2019

The Mega-Progress

This year we are combining all the progress report posts into one huge long report. Previously we had a separate post for each one, but I think it might be more readable (or skippable!) as one big long post.

We’re going to cover the following areas in order:

• iDeCo Progress
• NISA Progress
• Mortgage Progress
• Mutual Funds Progress
• Dividend Progress
• Giving Progress

Lots to cover there, so let’s get started.

iDeCo Progress

At the risk of repeating myself, I think iDeCo is one of the best investment options for people who are planning to retire in Japan.

You can see last year’s iDeCo progress report here.

The contribution limit on this account is frustratingly low as I am a member of a kyosai, so the government has decided I don’t need as much help to save for retirement. My maximum contribution is only 12,000 yen a month.

Here is the current overall picture:

Not too shabby! At this rate I’ll be able to pay in for another 18 years (23 if the government extends the pay-in period by five years as is currently rumoured) so this should end up being quite a nice slush fund.

I have my account with Rakuten and am still using the same three funds (one international developed equities, one international developing equities, and one Japanese equities):

I should probably take another look at the iDeCo options in Rakuten and see if it would make sense to swap out some of those funds. Something for the winter break perhaps.

NISA Progress

NISA is not as good a deal as iDeCo, but it does have some advantages, mainly that your money is not locked up (you can cash out at any time) and the contribution limits are much higher.

There are rumours that the government is considering replacing the current ordinary NISA with a slightly modified version that is pretty similar. More info on the blog when we have it.

Here’s how my NISA account is looking right now:

As you can see there is nothing in the 2015 account, so I won’t be rolling anything over into my 2020 account. However, the 2016 account is looking pretty healthy, so I will probably roll that over in its entirety to take advantage of how NISA allows you to roll over your entire year even if it is over the normal annual limit.

I rolled over a lot of my holdings last year, so there were not many new contributions:

The bottom six were rolled over, and the others were just minor top-ups.

Next year I am going to continue buying dividend shares in my NISA account (mostly US with some Japanese), topping up with mutual funds to finish off the allowance.

Junior NISA

We continued paying into my granddaughter’s Junior NISA account, buying a single global equity mutual fund. She has another 13 years of potential contributions before she gets full control of the account at the age of twenty. I’m hoping to have brainwashed her sufficiently at that point that she leaves the investments to run rather than spending it on champagne and international travel 😉

In general, I am not a huge fan of the Junior NISA. The tax advantages do not seem to make up for the restrictions. For many people, it might make more sense to just invest themselves in their own accounts and they can just give the money to their children later if they want/need to. However, if you can max our all your own accounts, Junior NISA might be worth a look.

Mortgage Progress

Our mortgage started out as a 9.9 million yen loan (9 million for the manshon, 900,000 to cover purchase costs) at a 0.5% floating rate for 30 years.

We overpaid the mortgage last year (you can see last year’s report here) and again this month, so our current balance is 8,490,203.

If we continue overpaying at this rate, we’ll have paid off the loan in seventeen years time (ten years early).

While I am not sure if paying mortgages early makes much sense in Japan, it is satisfying to see the numbers come down and having a fully-paid off property will give us more flexibility down the line if we want to sell or rent it out (most residential mortgages do not allow you to rent the property out).

Mutual Fund Progress

A couple of years ago I opened an account with Monex to replace my THEO account after I decided the fees for THEO were just too high and buying a cheap mutual fund would probably yield better results.

So that’s what I did. I bought the eMaxis Slim global ex-Japan fund and have 50,000 yen a month taken out of my bank account automatically and put into that fund.

As you can see, 50,000 yen a month can build up fairly quickly! Confusingly, I ended up buying two versions of the fund: one that pays out dividends and one that reinvests, but in fact neither of them pay out dividends so they are basically the same thing.

I suppose I could change this so that it invests in the eMaxis Slim all-country fund instead. Something to think about in the new year perhaps.

Dividend Progress

While I believe that the best way of investing for most people is going to be buying cheap diversified index funds and holding them for the long-term, I also kind of like dividend investing.

It may have a lower expected return and be less tax-efficient, but there is something about getting dividends every month and seeing them grow over time that appeals to me. I also love the simplicity of them: you don’t need to think about selling things when you need an income from your investments as you automatically get the dividends coming into your account.

I own mostly US dividend-paying shares, but also have some Japanese ones.

These are the dividends I have received over the last six years (shown in yen, although most of them were actually received in US dollars). Progress slowed last year when I sold all my fossil fuel stocks, and hasn’t quite recovered yet.

Here you can see 2019 dividends, and the main drawback to this style of investing: the relatively high taxation. In my case, I lose over a quarter of the nominal dividends to tax. Investing in index funds largely avoids this, as you can own them for a long time and pay no tax as long as you don’t sell.

Dividends, on the other hand, are taxed every time you receive them. In the case of US stocks, they are taxed twice (once by the US and then again by Japan). If you own your dividend payers in a NISA account, you only have to pay the US tax.

I’m going to continue to buy and hold dividend paying stocks, however, alongside my index funds. Eventually I’d like to be getting over a million yen a year in dividends. This would combine with our eventual pensions to provide us with a relatively stable basic income floor.

Giving Progress

Sadly this has not changed at all since last year’s update. I am still giving the same amounts to the same charities (it is all automatic so I don’t have to think about it). I would like to increase those amounts and perhaps find another couple of charities to add to the list. If you have any suggestions, particularly for charities that focus on campaigning for environmentally friendly policies, please mention them in the comments 🙂

Overall

Phew. I wonder if anyone made it this far?

So, what do you think of the new format? Is it better to have everything in one post, or would it have been better to write a separate post for each section.

How are you getting on with your plan? Was 2019 a good year for you too? I was actually pretty surprised to find that our family net worth had gone up by more than twice my annual salary this year. Just goes to show what a bull market combined with aggressive saving can do over time.