To roll or not to roll, that is the question
This got me thinking. Do I want to roll over my holdings? What does rolling over entail? Is it better to roll over or buy new things in 2019?
This is the first time I have had to deal with this, so this post will be a good chance to learn about the system and decide what to do.
Here’s my current understanding of the system:
When your NISA tax-free period of five years ends, your investments are moved out of the account and the ‘purchase price’ is reset. This is the mechanism that allows you to avoid capital gains tax*
*it is also the source of the NISA account’s main weakness -if your investments have fallen in price the price will be reset lower than your purchase price, exposing you to capital gains tax on the full recovery.
However, you can instead choose to roll over the investments into a new NISA account. This will use up your NISA allowance for that year. You also need to choose an ordinary account for that year (not a tsumitate NISA one).
You can now roll over more than 1.2 million yen, so if your investments have done really well rolling them over might be a bit of a no-brainer.
Here are my holdings for the 2014 NISA year. On the one hand they are a great example of how you will learn a lot through getting started investing, but on the other they are a bit of a waste…
If only I had put the whole year into index funds… or Altria 😉
Looking at those holdings, I am not sure what to do. The total value is under 1.2 million, so there is not a case for moving the whole amount to ‘increase’ my 2019 allowance.
I guess I have three options: I can let things move into my 特定口座, I can roll things into my 2019 NISA, or I can sell things. Or some combination of the three (I believe you can treat different investments differently).
Should I sell the losers because I’ll be exposed to capital gains tax on any recovery? Sell the winners because we’re overdue for a correction? Or follow my instinct, which is just to put everything in the 特定口座 and keep collecting dividends for the next forty years?
What would you do? What will you do, if you have a NISA account coming due? Any thoughts?
I’m planning to go with your final option. In theory my dividend yield on cost will be high enough that the tax on the dividends in my 特定口座 won’t be too painful. I’ll then use the next year’s allowance to buy more dividend growth stocks.
I like that plan 😀
I think even if you were 100% happy with the investments, if it’s at a loss coming out of the NISA it makes no sense to roll it over. You should sell it and buy it back again in the NISA (assuming fees are not higher than the CGT…). Correct me if my reasoning is flawed (maybe one for the forum?).
Example: you bought at 100, but it comes out of the NISA at 50.
Don’t roll over, hold in taxable: You’ll pay CGT on any gain from 50.
Roll over in NISA: You get tax-free dividends and gains from 50.
Don’t roll over, sell and rebuy in NISA: You can buy twice as much (actually more because the allowance is now 1.2 times higher than in 2014) in the NISA this year and get twice as many tax-free dividends and gains from 50.
In you’re case, you’re not so happy with your investments, so it makes sense not to roll them over, at least. Whether you sell them or not depends on whether you think something else will make you more. Sounds like you should get rid of them and buy an index fund, if that’s your strategy and the trading fees are not prohibitive.
If you roll over less than 1.2M can you still top up to 1.2? In that case rolling over a loss wouldn’t be so bad. 🙂
My current understanding is that if you roll over less than the next year’s allowance you would still get to use the remaining portion.
If I’m wrong about that rolling over makes no sense as you point out 🙂
If your 2014 is above 1,2 million yen in value you can rollover the entire amount. If it is below, you can still rollover the full amount and buy new investments up to a combined total of 1.2 million. If you think an index fund is a better investment than your current 2014 holdings then I think it makes sense to sell them and buy the index fund because investment choice (the dog) is more important than tax protection (the tail). Don’t let the tax tail wag the investment dog 🙂
I think the question is whether to keep them (be in NISA or normal account) or sell them. The location doesn’t really matter if you’re planning make investment of at least 1.2M for next year. If anything, whichever has higher return should go to NISA. …maybe? Not like I’m experienced or anything 😀
I can’t see one of the options being better than the other right now, hence the wavering 🙂
I also got that email. How can you see your nisa holdings for a given year in rakuten website?
If you go to the NISA menu, you can click on 年別保有商品 and then see things by year.
I’m not sure if this I understand the rollover correctly (since I haven’t had to deal with it myself) but here are my thoughts on it:
I’m going to use Santander as an example since it was the biggest loser in your portfolio.
Rollover:
Isn’t it better to roll this over to your 2019 allowance since the price is already very low and any gains will be tax free over the next 5 years.
Selling:
If you sell at the current price, you are accepting your losses on this particular stock. (I do not recommend)
Move to normal trading account:
If you move it to a normal trading account and the price goes up, you are paying tax on all gains from the current price.
Unless I am missing something, it seems quite obvious to roll this particular stock onto the 2019 allowance.
Thanks! That is true, but assumes that:
1. Santander’s price will recover (I’m not sure it will), and
2. I won’t be able to find better things to invest in (I think I probably can)
If the price does not recover and I chose something that ultimately performed better than Santander, I should instead buy the better investment in my 2019 NISA as it will produce better returns.
Santander’s losses so far are a sunk cost, so can be ignored completely.
I’m not sure when you bought MO, and it’s certainly off it’s high of $73+, but it has been a dividend gold mine. My 900 shares are paying a little over $2500/yr now, on an initial investment of a little over $17k. Do the math.
Yes, MO is now rated really poorly–and I wouldn’t buy it now–but there might not be a better example of what dividend investing can produce.
I think it makes sense to rollover the stocks in your NISA as long as you think they are attractive investments regardless if they have gone up or down, but the benefit to you is greater if they have increased. My 2014 NISA stocks (CMIC (2309), Alsok (2331), Komatsu (6301), Itochu (8001), 7 Bank (8410)) total about 1,780,000 yen. The advantage of rolling them over is that I can protect a 1.7 million yen investment instead of just a 1.2 million yen investment from taxes. If I were down and the 1 million yen investment were now worth just 500K yen, it would still make sense to rollover because I could then buy an additional 700K in new stock and still protect what had been a 1 million yen investment. For NISA and any other investment it still makes sense to sell as soon as you think the stock is no longer a good value, even if you have not reached the end of the 5-year cycle. Because I still like my 2014 choices, I am rolling them over.
Late to this but my plan is probably roll over. If they’re down I don’t want to reset the price lower than I bought them, and if they’re up, I get to have more in my nisa.
The one exception to that will be my first years stuff which is poorly structured for tax purposes(generating dividends which aren’t internally reinvested, expanding the nisa allocation)