Progress Report 2020

The Progress Continues

This year we will continue combining all the progress report posts into one huge long report. I think they work better as one big long post. You can see last year’s post here (spoiler alert: this year’s is almost identical).

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

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.

My contribution limit on this account remains 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. Non-kyosai salaried workers may be able to contribute up to 23,000 yen a month, and people paying kokumin nenkin up to 68,000.

Here is the current overall picture:

Not too shabby! That is actually a big improvement on last year’s total of 444,650. The markets were kind this year, but what this really shows is the power of monthly contributions. Even investing a small amount of money every month can end up being a significant sum.

At this rate I’ll be able to pay in for another 17 years (22 if the government extends the pay-in period by five years as is currently rumoured) so this should end up being quite a nice retirement bonus.

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):

The Tawara fund is very cheap and a decent option. The other two are more expensive than I would like, but Rakuten doesn’t have the best fund lineup (Monex is better IMO) and I am too lazy to change providers at this point.

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.

The current ordinary NISA will be replaced with the New NISA (breaking news: it is broadly similar but slightly more complex) in 2024.

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

2016 was my amazing, flukey, outperforming year (solely due to me buying Apple after they started paying a dividend) so I will certainly be rolling that over into my 2021 account.

Last year I didn’t roll over anything, so my 2020 NISA holdings were all new purchases this year:

The eMaxis Slim fund was mainly used to top up and max out the year. Someday I will learn my lesson and stop messing around with single stocks, but not this year.

I will continue buying dividend shares in my NISA account (mostly US with some Japanese), topping up with mutual funds to finish off the allowance in the same way (as you will see in the dividend section below this is probably a bad idea but it makes me happy and substandard performance is still better than nothing).

Junior NISA

We kind of tapered off paying into my granddaughter’s Junior NISA account, still buying the same single global equity mutual fund. She has another 12 years of potential contributions before she gets full control of the account at the age of twenty. We’ll continue dripping money in but as we now have five grandchildren won’t be able to max this out any more…

In general, I am not a huge fan of the Junior NISA, and neither is the government it seems as they decided to phase it out early. Now that it is easier to take the money out early it might be worth considering Junior NISA if you are able to max out your own tax-advantaged accounts.

Mortgage Progress

Now I am kind of proud of this section.

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 again this year, so our balance at the end of the year will be just under 8 million yen.

If we continue overpaying at this rate, we’ll have paid off the loan in about fifteen years’ time (eleven 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).

Our monthly payment is just under 30,000 yen (about 25,000 towards principal, and 4,000 in interest) so overpaying 100,000 yen twice a year is about 60% extra, enough to make a dent without being too much of a burden. I see paying the mortgage down as a form of diversification, even if we could make more money by investing instead.

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.

Unfortunately this year we ended up getting our kitchen renovated (my wife insisted and as we were forced to cancel our very expensive summer family trip I couldn’t really object). To partially fund the work I sold 1.3 million from this account, so we took a few steps backwards here:

Even with the big hit it’s still looking okay. Just goes to show the power of socking away 50,000 yen a month.

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 annual dividends I have received over the last eight years (shown in yen, although most of them were actually received in US dollars):

After a very promising start we kind of stalled out the last few years. This is mainly due to selling out of fossil fuel companies in 2018, although I am not sure what happened this year. Hopefully we’ll cross the 300,000 yen a year milestone in 2021. This number is net of tax, and I’m hoping that eventually we’ll receive something like a million yen a year in dividend income.

Unfortunately dividend income is not very tax-efficient, as you can see below:

So I ended up paying over 10,000 yen in tax on 55,000 yen’s worth of dividends from Japanese shares, and almost 600 dollars on 2850 dollars of dividends from US shares.

A few people have expressed an interest in seeing what stocks I hold, so here is a brief list of the Japan-listed stocks:

And the US-listed ones:

Some of these are ETFs. All the companies pay a dividend, and my current strategy is to buy and never sell. This takes 50% of the decision-making out of my hands 🙂

Giving Progress

I am continuing to donate money to the following charities automatically each month:

I want to add a fifth charity to this list for 2021, preferably a Japanese one. Any suggestions? I would prefer something social or environmental.

Overall

Well, that was a long post. I’ll be surprised if anyone actually reads to the end…

2020, at least from a financial point of view, was okay for us. We increased our net worth quite a bit, partly from continuing to save and invest, and partly from growth in the markets. Unpleasant as parts of 2020 have been, financially it took us quite a bit closer to our goals.

How are you getting on with your plan? Was 2020 okay for you too? We’ll be doing a planning post in January, so have a think about your goals before then.

26 Responses

  1. It’s an interesting read Ben. Thank you. As I’ve told you before, you’ve changed our lives. By implementing what you recommend, we too have managed to increase our net worth considerably in the last 3 years. We’re looking forward to the next 3 / 5 / 10 years bring. If you haven’t started saving and investing yet, start in 2021.

  2. Congratulations on the excellent return from Apple. It’s that kind of homerun that keeps tempting us to dabble in individual stocks even while recognizing the more reliable risk-adjusted returns from index fund investing. (I have the same stock-picking vice but haven’t been prescient enough to own AAPL as an individual stock position.)
    Are all of your US stock and ETF positions also in Rakuten accounts? As a US citizen I find they won’t allow me to buy US stocks (which makes no sense) but their fees are much less than Nomura. Do you find they give you both a reasonable exchange rate and low trading fees for the US stocks?
    I’m finding that dividend income has increased very slightly for me in 2020 but not in keeping with the increase in stock prices. I still try to avoid dividends when I can because of the tax inefficiency (which doesn’t mean I don’t feel a spark of joy when I receive the dividend) but one of my more speculative moves this year was to start buying a retail REIT (Simon Property Group: SPG) over the summer which comes with an outsize dividend. My investment thesis is that they have become stronger by buying out some competition at discounted prices while holding relatively stronger properties. Still putting much more new money into Vanguard index funds than individual stocks.

    1. Oh, Apple was a complete fluke and I only bought it because they started paying a dividend and seemed to have more cash on hand than god. Worked out well though.

      My best single stock is West Holdings (1407), which is up 718% since I bought it. Complete fluke as well.

      All my single stocks are in Rakuten. The fees are okay. There used to be a $20 minimum but they have since reduced it to $5 to match their competitors. The exchange rate is reasonable I believe. Since I am buying and holding forever I am not too concerned with minimising trading costs.

      Most of our assets are in diversified mutual funds or ETFs.

  3. Interesting that you have so much in US stocks, especially considering you’re not American. It seems that it opens you up to currency in addition to the risk inherent in having so much in individual companies in a specific country, although of course they are mostly multinational. I also assume that JP based funds do a better job of handling the tax situation, although I admit I’m no expert on how all that works
    In a similar situation, I’m much heavier on JP stocks, both funds & individual stocks. Something like the eMaxis Slim series makes a lot more sense to me than buying more directly from the US.

    1. Oh, I don’t recommend people do this! I consider the dividend stocks a play part of my portfolio. The vast majority of our assets are in diversified mutual funds or ETFs.

      However, for me, I find the dividend growth strategy quite satisfying, and will continue building up my collection for now. I expect that over the next 2-3 decades I should be able to build up a portfolio of 100+ dividend paying companies that could provide us with a decent annual income in perpetuity.

  4. Thank you for posting your progress report ! I am still in the process of writing one of my own!

    The Giving Progress section was interesting. I am also interesting in finding some Japanese Charity to donate to. I did one for student’s education through the furusato nozei Rakuten service but it’s a one time donation and from what I can tell, only for the selected prefecture. I also donate to the Japan Cat Network by checking out their amazon wish list and purchasing food for them every so often.

    About your mutual funds, I also invest monthly but I am thinking of increasing my monthly budget for mutual funds. Do you feel that just one fund is good or would you want to try adding a new one in the future?

    1. Well, one fund is easy, and I am very lazy. That particular fund is basically the world stock market minus Japan, so it’s a bet on the world economy continuing to function and grow. I’m happy with it. Obviously I have other investments too, but I would be perfectly happy just to have the eMaxis Slim all-country fund only, for example. Perhaps someday I will stop messing around with single stocks and allocations and just buy this ^-^

  5. Thanks for the transparency and the very detail report.
    For me 2020 has been a nice year as well. I have followed the plan and invested every month depending on my revenues and expenses. I have reduced my mortgage as well with some past extra gains.
    For funds and stocks, it has been a very good year actually. I am still hesitating on the strategy for more stocks with dividends. I also like the dividends idea but don’t like to hold individual stocks. It is too volatile for me and I don’t like to see so much up and downs.
    For investment it has been a good year. I remain very humble though because I know so many people have lost loved ones, lost their jobs, are in serious financial situation or cannot enjoy the activities they love…
    So I hope 2021 will be better…

  6. Yes, thanks very much Ben for posting your results and investment methods so transparently. I’m always interested to read how other savers are getting on and I was riveted to the end!

    My annual performance will have to wait a few more days as I always check it at the end of each quarter, never before. But from what I’ve seen so far it looks like it will have been a pretty decent year, despite being much less invested in stocks than you are. I still prefer the diversified approach, using bonds, gold and REITs in combination with stocks. It hasn’t failed me yet though the results are a bit lacklustre some years compared to the 100% stock portfolios. But horses for courses, eh? The important thing, as mentioned in one of your links recently, is to keep at it year after year, even if the returns are modest. It’s all about compounding.

    I fully agree about paying off the mortgage, by the way. Was so happy when that millstone was taken off my neck!

    Best wishes for 2021,
    Ian

  7. Interesting that you’ve checked out of oil, but not tobacco… 😉

    (Not a criticism–I own PM, MO, and BTI.)

    1. Indeed. I think fossil fuels are destroying the planet but also heading towards being largely worthless in the future. I hate tobacco personally and will growl at people that smoke near me but I think the companies will remain profitable for a long time.

  8. Just paid off my mortgages in Australia. Planning to stay in Japan for good. Moving part of salary to ideco looks tempting. How to?

  9. Looked up ideco. I’m 62 , working full time, looks like not for me. Anything similar ? Planning to work another 3 years

    1. Nothing that will reduce your income taxes. NISA allows you to invest without paying tax on capital gains or dividends.

  10. Ben, is it possible for you to setup an IRA or IRA like account to shelter your dividend earnings? I can’t recall what options your nationalities provide you.

    Your buy and hold until eternity is interesting is probably the best option if you have good diversity. So that means no wild speculations with a small amount of money?

    This year could be the start of a long run for value/dividends. I’ve been increasing my exposure to these the later half of the year as well.

    One plug for a charity that I’ve volunteering at for a few years is Second Harvest Japan. The CEO’s done a fabulous job educating Japanese companies about donating excess food and they’re making a big difference in getting folks fed (sort of a hidden problem here). They appear to put their donations to really good use.

    1. You can only use a UK ISA if you are a tax resident of the UK and I am not. Pretty sure Japan would not recognise it as tax-free either. About half of my dividend shares are in a NISA account -that shields them from Japanese but not US withholding taxes. I have been too lazy to claim the US taxes back so far, but imagine that once the amounts get large enough that will provide sufficient motivation to do so!

      Thanks for the Second Harvest tip: have now signed up to donate every month. And that is my six charities for 2021!

  12. The bombshell here for me is that you have an 8-year old *grand*daughter? I always thought you were 40ish…

    1. Ha, ha, I am 43. I have stepdaughters, and five grandkids now (the youngest was born a couple of days ago!).

  13. Hey Ben,

    Thanks for the report and great to see that you are making good progress. As for your final question regarding giving, I did a fair amount of research into environmental charities this year and (even though not strictly Japanese) I decided to donate to the WWF Japan. I was also looking for a local charity too but couldn’t see anything really suitable and aligned with my values. So far I have found the Japan branch to be friendly and informative.

    All the best in 2021.

    Andy

    1. Thanks Andy! I found my two new charities for this year (2nd Harvest Japan and the Ocean Cleanup thing) but will keep WWF in mind for next year. If all goes well I should be adding a charity or two every year (much like my dividend stocks -kind of an anti-dividend in a way). All the best to you too ^-^