The Stock Market

Ugh, really?

So, stocks are down again. The markets as a whole are down, and individual shares are down more.

A lot of the shares I own, and a few I bought last week, are down too.

It’s not fun to ‘lose’ money, even if it’s not really a loss. The number today is smaller than the one yesterday. It’s even less fun to see something you bought a couple of days ago much cheaper now.

You might remember the post where I talked about buying Santander on a whim. Well, Santander is now worth about 40% what I paid for it. Nice going, genius 🙂

Luckily these price shifts don’t bother me much, and I find them bothering me less as time goes on and I get more used to them. I’ll be buying stocks for a long time, so price falls are probably going to help me in the long run, and more importantly, I have a plan.

​There are a few takeaways here.

1. You need to know why you are doing what you are doing.

I have a simple plan. I will buy indexes and individual shares in order to build up passive income from dividends. I will never sell anything. This is not a very good plan (it’s tax-inefficient and will probably perform less well than a better-designed one) but it suits me and my character. I find it easy to implement and somewhat fun.

2. Indexes are safer than individual shares.

Most of our investments are in large passive indexes, and those indexes don’t move  anywhere near as much as individual shares. It’s also much easier to make decisions, as you only have to decide how much to buy, not what to buy. You can buy when prices fall because the market is cheap. This is different from buying an individual share when it falls, because there may be a problem with the company.

3. Your circumstances matter.

I’m happy right now because I am buying shares and will continue to buy them for the next several decades. Temporary price falls are interesting, not scary.

If I was living off the income produced by my portfolio, price falls would be terrifying. 

Your plan has to match your circumstances.

I hope everyone is enjoying the new year despite (or because of) the action in the stock markets. Be careful out there!

13 Responses

  1. You took the words right out of my mouth. It is good to hear someone in the same boat. Exactly same things happened to my stocks. The last week was rather harrowing on the Australian stock exchange. I feel a little at ease now……….

    1. Hi Sarah
      I reckon there are a lot of people in the same boat at the moment. I’m going to just ignore it for now and go back to cleaning out the kitchen cupboards 🙂

      1. Hi Ben, I love your blog, it’s very informative and fun to read. I’m considering investing in some indexes (indices?) and signed up for Rakuten Securities. I know it’s easy to purchase a JP index but how about US ones? Looking forward to catching up over the tour or elsewhere.

  2. Hi Kiel
    Definitely! Very easy to buy US and world indices on Rakuten. Drop me an email and I can give you more specific advice. If you make it to Sendai or Omiya I’d love to catch up 🙂

  3. Hi, first time commenter here from Kansai. I too am working with the intent of retiring in Japan, hopefully retiring early! I just started a NISA last year and I intend to fully max out the annual contributions. Last year I got in my million with only 240yen left “on the table” uninvested.
    I like the fundamental lesson of your three takeaways in this post. But I have to ask: why do you believe that passive income from dividends is tax-inefficient? Isn’t that the whole point of the NISA? I too am buying indexes with the intention of never selling them and living off the dividends. Just like you, price drops or “market corrections” or whatever the buzzword of the week is, they don’t scare me. Rather, they just present more opportunities to buy.
    Looking forward to reading more!

    1. Hi RK (like the name!)
      I think there are two reasons that dividend investing is suboptimal (compared to total return investing using tax loss harvesting, etc.).
      One is that dividends are taxed (not in a NISA account, but for now NISA only lasts five years) whereas money reinvested into the company resulting in capital appreciation is not taxed until you sell.
      The second is that by not selling strategically (tax loss harvesting and taking profits) I am probably going to make less total return.
      However, both of these points are less important than the fact that I am comfortable with my strategy. I have tried value investing and found it exhausting trying to keep track of prices and when to sell.
      I think dividend (growth) investing suits some people, and other strategies will suit others.
      If you are only buying indexes you’ll probably do better on aggregate, but receive less in dividends than you would from individual companies. Sounds like you have your plan figured out though, which is the main thing 🙂

  5. HI, Ben. I’m trying to apply for a Rakuten NISA account, but am running into some difficulty with the Japanese portion of the application for the 総合取引口座(2 unreadable kanji to me)申込書。That is to say, it wants me to fill in my name on the top line of that application form in kanji, and as a foreigner, I do not have a kanji name, so the Net software won’t let me proceed with the application process. Also, step 2 of the application process requires that I send them my jyuumin hyou, which has a middle name (and the Net application form does not allow for a middle name, since Japanese people do not have one). I believe you have a Rakuten NISA account, so perhaps you ran into similar issues when opening yours. Do I need to contact Rakuten’s customer service line directly regarding these issues?

  6. Hi Okinawa Investor (seems like you are more than half-way to retirement in paradise)
    I just had a look at the online form. Did you try typing katakana into the kanji section? I opened my account a long time ago, but I think that’s how I got around that.
    If that fails then call them up and I think they will send you a paper form. Takes a bit longer but still gets the job done.
    Let me know how you get on, I am planning to write a guide to opening and operating a Rakuten Securities account in the future.
    cheers

  7. “I am planning to write a guide to opening and operating a Rakuten Securities account in the future.”
    ^^^Eagerly awaiting this–any sign of it on the horizon???

    1. Hi MyTime
      Thanks for the timely reminder! Right now the most pressing project is to get through the RetireJapan presentations at the JALT Conference in Nagoya this month.
      After that I need to finish the RetireJapan guide to personal finance, then a guide to the J401k, and then the Rakuten guide might get written.
      Too many projects, not enough willpower 🙂
      Anything that gets produced will be written up here on the blog -easiest way to keep track is by joining the mailing list.

  8. Thanks for the reply! I’m already on the list.
    I just discovered this site a couple of weeks ago, and since then I think I have read every article, comment, and forum thread.
    After a long time in Japan and many ups-and-downs, I’m finally in a position to start investing money (better late than never), but I am pretty clueless about how to go about it. This website has been a huge help.
    Good luck with the upcoming presentations!