How much leverage is safe in investing?

[mighty58]

Seems like we're going around in circles in this thread. Many people (myself included) have stated that (1) past performance indicates you are more likely to come out ahead than not, (2) however, past performance is not a guarantee of future performance, (3) therefore, whether you want to take your "guaranteed" 2.8% or invest is ultimately up to the amount of risk you want to take.

Is there something else you:re looking for not covered by these replies?

[RMA]

Seems like we're going around in circles in this thread. Many people (myself included) have stated that (1) past performance indicates you are more likely to come out ahead than not, (2) however, past performance is not a guarantee of future performance, (3) therefore, whether you want to take your "guaranteed" 2.8% or invest is ultimately up to the amount of risk you want to take.

Is there something else you:re looking for not covered by these replies?

Thank you very much for your reply and I apologize for all the confusion. In nutshell my question consisted of 2 points:

1. Guaranteed 2.8% interest from bank (no appreciation) or investing?

2. If investing then what are the safe and sound options?

On first point, I understand that it mainly comes down to personal decision and how much one is interested in taking risks and what proportion he's already investing in equities and fixed returns etc. The community can help very little in this case especially when they do not know all the details so I would like to drop that point here.

Now I am interested in second point, i.e., if I forgo 2.8% guaranteed returns in favor of investing then what should be my best bets? I would like to have balance diversified portfolio where I should get yearly returns to cover some loss of interest and I will not be looking for short term appreciation however in long term (say 10 years) I should be expecting it to appreciate.

[Kanto]

Seems like we're going around in circles in this thread. Many people (myself included) have stated that (1) past performance indicates you are more likely to come out ahead than not, (2) however, past performance is not a guarantee of future performance, (3) therefore, whether you want to take your "guaranteed" 2.8% or invest is ultimately up to the amount of risk you want to take.

Is there something else you:re looking for not covered by these replies?

Thank you very much for your reply and I apologize for all the confusion. In nutshell my question consisted of 2 points:

1. Guaranteed 2.8% interest from bank (no appreciation) or investing?

2. If investing then what are the safe and sound options?

On first point, I understand that it mainly comes down to personal decision and how much one is interested in taking risks and what proportion he's already investing in equities and fixed returns etc. The community can help very little in this case especially when they do not know all the details so I would like to drop that point here.

Now I am interested in second point, i.e., if I forgo 2.8% guaranteed returns in favor of investing then what should be my best bets? I would like to have balance diversified portfolio where I should get yearly returns to cover some loss of interest and I will not be looking for short term appreciation however in long term (say 10 years) I should be expecting it to appreciate.

The confusion came from members being unsure if you were talking about 2.8% interest to be paid annually on a loan, or 2.8% guaranteed return interest on a deposit. You seem to get back and forth on this point.

1. You cannot get 2.8% on a bank in a deposit. This may be possible with an annuity product...before fees.

2. The investment should be treated as part of your whole portfolio. What are you invested in now?

The standard advice for a portfolio is diversified, low-cost index funds. (Emaxis series).

You can add more bond exposure to cut the downside risk.

If you are worried about currency exposure you can purchase hedged products.

[RMA]

Thank you for your reply.

The confusion came from members being unsure if you were talking about 2.8% interest to be paid annually on a loan, or 2.8% guaranteed return interest on a deposit. You seem to get back and forth on this point.

From what I am seeing these both are same things at the end of the day if I do not overleverage myself.

1. You cannot get 2.8% on a bank in a deposit. This may be possible with an annuity product...before fees.

Let's say somehow I am getting as a special case so better we should leave the discussion on this matter as it will create further confusion.

2. The investment should be treated as part of your whole portfolio. What are you invested in now?

I just started investing from this year and right now I have maxed out NISA for 2021 (emaxis slim all country) and planning to start Ideco soon where I will go for rakuten all country equity fund with JPY 23,000 p.m. contribution.

The standard advice for a portfolio is diversified, low-cost index funds. (Emaxis series).

You can add more bond exposure to cut the downside risk.

If you are worried about currency exposure you can purchase hedged products.

emaxis series are mutual funds, how about I go for maxis ETF in tokutei account? What are the average dividends p.a. in case of maxis S&P 500 ETF? Should I go for dividend stocks also? Objective is to earn as close as 2.8% p.a. in dividends to cover yearly interest costs and portfolio appreciation in long run. Is it possible or I am daydreaming?

Also whether the interest costs can be deductible from the dividends/capital gains for tax purposes?

[RMA]

After some searching on the internet I found the dividend return on S&P 500 ETF as attached. Can anyone confirm if I can expect the same dividend return on domestic Maxis S&P 500 ETF (2558)?

[Kanto]

After some searching on the internet I found the dividend return on S&P 500 ETF as attached. Can anyone confirm if I can expect the same dividend return on domestic Maxis S&P 500 ETF (2558)?

No one can confirm future returns.

2558 is young and has only returned dividends twice. (see attached).

Remember, you will need to pay a 20% tax on these dividends.

Can you offset the tax? I do not think so. Why? Because the terms of the loan would not allow you to use it for investments. Those loan terms do not exist as far as I know. However, that is a question for an accountant or the bank.

Source -> https://maxis.mukam.jp/etf_fund/182558.html

[RMA]

After some searching on the internet I found the dividend return on S&P 500 ETF as attached. Can anyone confirm if I can expect the same dividend return on domestic Maxis S&P 500 ETF (2558)?

No one can confirm future returns.

2558 is young and has only returned dividends twice. (see attached).

Remember, you will need to pay a 20% tax on these dividends.

Can you offset the tax? I do not think so. Why? Because the terms of the loan would not allow you to use it for investments. Those loan terms do not exist as far as I know. However, that is a question for an accountant or the bank.



return.jpg

Source -> https://maxis.mukam.jp/etf_fund/182558.html

Thank you for your reply. I really appreciate. I understand that no one can confirm future returns. What I am struggling here is the options available plus language barriers.

1. Do you mean to say that 2558 is young and I cannot expect it to give dividends similar to SPDR S&P 500 (SPY)?

2. from your link, I can see dividends were only 90 yens in total for 2558 six months apart. Does it mean 0.9% before taxes for 12 months?

[TBS]

Remember, you will need to pay a 20% tax on these dividends.

The tax by Japan now works out to be less than 20% on these dividends, because of the deduction for the foreign taxes that are withheld. It means the net dividends per unit of the 2558 MAXIS ETF last year were:

- 2020/06/08 ~23 yen
- 2020/12/08 ~55 yen

The calculations are automatic if holding in tokutei kouza. See more here and the post I wrote on this.

RMA: if you buy via NISA or Tsumitate NISA, you will get the gross amounts (27 yen and 63 yen) in the screenshot Kanto posted.

[RMA]

Remember, you will need to pay a 20% tax on these dividends.

The tax by Japan now works out to be less than 20% on these dividends, because of the deduction for the foreign taxes that are withheld. It means the net dividends per unit of the 2558 MAXIS ETF last year were:

- 2020/06/08 ~23 yen
- 2020/12/08 ~55 yen

The calculations are automatic if holding in tokutei kouza. See more here and the post I wrote on this.

RMA: if you buy via NISA or Tsumitate NISA, you will get the gross amounts (27 yen and 63 yen) in the screenshot Kanto posted.

Thank you for your input. Does it mean 0.78% dividend return after taxes on 2558 for last year? The dividend return on SPY was 1.78% for 2020. Why is the difference when both ETF track the same fund?

Sorry if I am being too noob because I am just not understanding how 2558 works as I cannot read any japanese.

[Kanto]

https://www.morningstar.co.jp/FundData/ ... 2020010801

That should be pretty clear.