Tsumitate Nisa Beginner Question

[germanium9]

Hi, I'm looking to purchase a fund on Rakuten and was wondering what this means.
分配金コース
「受取型」と「再投資型」
What happens if I select 「再投資型」?

[zeroshiki]

If its a fund that gives out "dividends" the 受取型 means you receive the money. 再投資 means they take the money and reinvest by buying more units of the fund.

Do note though that 再投資 is tax inefficient since you'd be taxed on the profit you make every time the fund gives out these dividends (not really an issue on NISA since its tax free).

[adamu]

What happens if I select 「再投資型」?

再投資 is tax inefficient since you'd be taxed on the profit you make every time the fund gives out these dividends

That's the case regardless of which option you select.

The real alternative for tax efficiency is to select a fund that reinvests dividends internally. Most of the index funds do this, and technically pay out a dividend of 0, making this choice mostly meaningless.

[germanium9]

I read that tsumitate Nisa is for a one year. What happens after one year? The account gets cancelled and I have to apply again and rebuy the funds?

[KCLenny]

I read that tsumitate Nisa is for a one year. What happens after one year? The account gets cancelled and I have to apply again and rebuy the funds?

My understanding (don’t take my word for it!) is that is just rolls over. You don’t need a new account or anything. But your limit just refreshes.
Please correct me if I’m wrong anyone as I’ve yet to have a full year and just took it to be the same as the U.K. ISA

[zeroshiki]

I read that tsumitate Nisa is for a one year. What happens after one year? The account gets cancelled and I have to apply again and rebuy the funds?

Tsumitate Nisa is for 20 years. The limit of 400k yen is an annual limit. You might be getting the terms mixed up.

[beanhead]

Tsumitate Nisa is for 20 years. The limit of 400k yen is an annual limit. You might be getting the terms mixed up.

Just to be 100% clear, by this we mean that the tax-free period is for up to 20 years.
It is not necessary to keep the investment for the full 20 years if you do not want to. It will usually be optimal to hold for the full period, but it is not required.
NISA and tsumitate NISA are more flexible than iDeCo, which in principle cannot be touched until 60 years old.

[germanium9]

Just to check
Let’s say I invested ¥10,000 every month in Fund A for this year under Tsumitate NISA. For the next year, can I switch to another fund (Fund B)? What happens to the money invested in Fund A? I can just leave it in there to grow right?

[Bushiman]

Just to check
Let’s say I invested ¥10,000 every month in Fund A for this year under Tsumitate NISA. For the next year, can I switch to another fund (Fund B)? What happens to the money invested in Fund A? I can just leave it in there to grow right?

As per my understanding (I use the regular NISA not Tsumitate NISA), you can switch (It's called "switching") to whatever funds you want to invest in at any time, you don't have to wait till the new year... Example: JAN, FEB, MAR - Fund A. APR, MAY - Fund B, JUN - back to Fund A etc...

What happens to the money invested in Fund A? I can just leave it in there to grow right?

Yes. Those investments you made in the first year can grow tax free for the next 20yrs. You can't add any more investments to that year, but you can sell some if you wish... But again, you won't be able to top up what you took out...

[RetireJapan]

Just to check
Let’s say I invested ¥10,000 every month in Fund A for this year under Tsumitate NISA. For the next year, can I switch to another fund (Fund B)? What happens to the money invested in Fund A? I can just leave it in there to grow right?

It might help to rephrase this slightly.

The NISA account is a receptacle. You can buy things within this and then sell them if you want to.

Each month you are buying pieces of fund A. Later on you can buy pieces of fund B. You still have the pieces of fund A you bought previously.

If you sell the pieces of fund A, you get the cash but you don't get to replace them inside the NISA account. You used up your NISA allocation and don't get it back.