Japan-based low-fee global index fund?

[adamu]

Sorry to drag this one back out again. Just got a nice hefty dividend from VT and along with it the US and Japan got nice hefty tax payments so my interest has been rekindled.

Basically I'd already decided not to go for VT for new investments, but now started to doubt my choice (already contrary to jcc's opinion) of the SBI ETF wrapper.

It's worth noting that although on paper exe-i has lower costs than say tawara and nissei, that exe-i is holding etfs and in turn getting that triple-tax whammy so it is questionable whether they can outperform the funds that hold stocks and on paper have higher management costs.

This is the key point. The tripple tax is on dividends, but the cost is on the whole fund. My feeling is that the lower costs will win out, but instinct and investing don't go well together so let's look at some numbers.

Let's say you hold 1000 stocks worth $10 each that charge 0.1% and pay a $10 (1%) dividend.
When the charges are taken, that will be a $10 charge.
The dividend is $10, so taxes on the dividend will be around $3. If you get 4 dividends a year, that's $12.

But now let's say a fund charges 0.2% instead but there are no taxes. This brings the charge to $20, while the dividend taxes would have been $12. Higher tax beats higher charge.

But now let's say the dividends are $100 (10%). Now we have 1% charge ($10), 2% charge ($20), and dividend tax ($120). Higher charge beats higher tax by far.

I'm not sure what happens as your holdings in the fund increase. The amount you pay in charges will increase, but so will the dividend you get.

It seems to depend on the amount of dividend. But this is me just making up numbers, I'd like to do this with real data (surely somebody has already done this...)

[jcc]

I'll just go over the numbers but I don't have the time to put together an excel to simulate the internal reinvesting of dividends and compare growths(maybe later)

VT has an expense of .1%

exe-i global tsumitate is .15%

Both will be taxed the same(non-us nations take their tax share of the dividends for stocks domiciled there. Then the US takes tax on everything, finally japan takes it on everything if you're in a taxable account). exe-i will reinvest the gains internally, so the question becomes "can .05% extra annual cost be beaten by having more money untaxed(in japan) money". Well, the savings are only being made on the dividends, so you would need to build up a fair amount of them to start "winning". With exe-i every year you pocket dividend gains into your tax-free account but you are paying .05% extra management fees.

There's going to be a break-even point where after a certain number of years(which varies by dividend rate) where exe-i might beat out VT, but honestly, I think it's a relatively insignificant choice and tax-wise both choices lose out to a domestic fund that is not a fund of funds.

And really, unless you are very attached to using vanguard, when using a tax-free account you really should have your domestic investments separately. If I'm not mistaken, with VT or exe-I global funds you are paying japan taxes on the individual stocks in the fund that are domiciled in Japan. Because as far as Japan is concerned those stocks are in a US fund and they are unaware of the fact that you are tax exempt.

Just to sumarize how things get taxed(this may be wrong, and it wouldn't be a bad idea to consult with a local accountant if really serious):

Inside a tax-free account
VT(0.1%)
- Japanese stocks: taxed by japan and us
- US stocks: taxed by us
- Non JP/US stocks: taxed by original country and us
- dividends: generated and given to holder. Reinvesting consumes allowance

exe-I global(0.15%)
- Japanese stocks: taxed by japan and us
- US stocks: taxed by us
- Non JP/US stocks: taxed by original country and us
- dividends: reinvested internally. "expands" tax free allowance

A combination of eMaxis slim offerings(world minus japan .15% and eMaxis slim topix .17%)
- Japanese stocks: no tax
- US stocks: taxed in us
- Non JP/US stocks: taxed in original country
- dividends: reinvested and "expands"


So, the eMaxis slim is essentially the same management cost but far better tax benefits. I can understand people wanting to go with vanguard just for reputation or whatnot. But exe-I barely manages to beat eMaxis slim on costs and feels like a poor choice to me unless your broker isn't offering anything else.

[adamu]

I can understand people wanting to go with vanguard just for reputation or whatnot. But exe-I barely manages to beat eMaxis slim on costs and feels like a poor choice to me unless your broker isn't offering anything else.

EXE-i is actually Schwab, not Vanguard, so there's not even that.

Thanks for this, I'm slowly being convinced.

Anyway I decided to beef up my emergency fund over the next few months - so plenty of time to ponder how to play going forward. Looking like two domestic funds will be the chosen path after all.

[jcc]

I can understand people wanting to go with vanguard just for reputation or whatnot. But exe-I barely manages to beat eMaxis slim on costs and feels like a poor choice to me unless your broker isn't offering anything else.

EXE-i is actually Schwab, not Vanguard, so there's not even that.

Thanks for this, I'm slowly being convinced.

Anyway I decided to beef up my emergency fund over the next few months - so plenty of time to ponder how to play going forward. Looking like two domestic funds will be the chosen path after all.

I was referring to VT when I said vanguard. I don't see any good reason to go with exe-I. It has virtually the same costs as eMaxis while having the tax disadvantages of VT

[adamu]

I found a great article that discusses the issues in this thread and also provides the numbers I wanted.

野村つみたて外国株投信はEXE-iつみたてグローバル株式に勝てるのか？

Here's the main comparison (translated):

●Nomura Tsumitate Foreign Investment Trust:

Total Cost 0.2566％ (inc. tax)（before accounting for points）
trust fee 0.2052％ (inc. tax)
other costs 0.0514％

●Rakuten Total World:

Total Cost 0.3996％ (inc. tax)（before accounting for points）
trust fee 0.1296％ (inc. tax)
management costs（estimated）0.05％
underlying ETF expense ratio　0.11％
tripple taxation cost（estimated）0.11％

●EXE-i Tsumitate Global:

Total Cost 0.31％ (inc. tax)（before accounting for points）
trust fee 0.108％ (inc. tax)
management costs（estimated）0.05％
underlying ETF expense ratio　0.042％
tripple taxation cost（estimated）0.11％

Hes pushing Nomura's global-ex Japan fund, rather than e-Maxis slim, but e-Maxis slim didn't exist at the time of that article. He talks about e-Maxis slim, and compares it to Rakuten's VT wrapper here: eMAXIS Slim全世界株vs楽天全世界株

●eMAXIS Slim Global Stock
Total Cost 0.226144％ (inc. tax)（before accounting for points）
trust fee 0.1225％（inc tax 0.1323％）
management costs 0.093844％

Even not though the SBI and Rakuten funds are eligible for points but eMAXIS Slim is not, eMAXIS Slim still wins on cost.

It gets more complicated though. Here's an article from last week where he shows that the Nomura fund performed better than eMAXIS slim over the last three months, despite the higher nominal cost and same underlying index: スリム全世界株は野村つみたて外国株投信に勝てなかった（3か月リターン）

[jcc]

refer above for post

Welp, the first part hardly surprises me. Essentially it confirmed my thinking that funds come out cheaper. Even when it's a slightly more expensive one like nomura. I've seen other variations on the same competition, and outside of "japanese S&P500 fund vs vanguard S&P500 ETF" it's pretty much always a win for the domestic fund

A very interesting point the guy makes in the last article is how "mix your own world minus japan fund" comes out significantly cheaper than their preset one. What that actually means is you could combing slim 先進国、新興国 and TOPIX/NIKKEI to create your own fund that would actually have cheaper costs than EXE-i. I mean, that .108 trust fee is just killing EXE-i's competitiveness. All they're doing is wrapping an ETF.

So the question just comes down to which fund to use.

As far as slim world vs nomura world, I do think that there's a couple of reasons it came out .02% behind in returns(I mean, that's sort of significant but it's actually less than the difference in management fees...).

First reason is that the slim world is a new fund and I suspect that meant some extra transaction costs setting the whole thing up.

Second reason is more benign and mostly luck: I suspect they keep costs down by minimizing transactions, which means also not following the index too tightly. This is going to cause some variation from the index which will sometimes put it slightly ahead, sometimes slightly behind.

If this was to become a long-term trend where it consistently lost to nomura, and by larger margins than the difference in management fees, I might be concerned.

But right now? I'm happy with it. Also happy with my choice to keep developed/developing/japan separate

[ivanpgs]

Hi guys, long time no posting here!

This was just the post that I was looking for! In my case, I will be applying for the Tsumitate NISA in SBI (because I also have one iDeCo account there), and I was looking to setup my funds' lineup.

I was thinking in trying 80% world equities (50% Developed, 20% Japan and 10% Emerging) and 20% for bonds (world bonds rather than only Japanese).


**************************
***** FIRST TOPIC
**************************
Searching for good candidates to cover the 80% world equities.


So far I am thinking about these two options for the 80% world equities:

- (1) Combing slim founds: 先進国 (50%)、新興国 (10%) and TOPIX/NIKKEI (20%)

- eMAXIS slim 先進国株式インデックス: https://blog.tacos-heaven.xyz/2018/03/3-11/
- eMAXIS slim 新興国株式インデックス: https://blog.tacos-heaven.xyz/2018/04/19-6/
- eMAXIS Slim 国内株式（TOPIX）: https://tsumitatetoushi.com/toushishint ... lim-jpkabu
- eMAXIS Slim 国内株式（日経平均）: https://tsumitatetoushi.com/toushishint ... lim-nikkei

Or...

- (2) EXE-I つみたてグローバル（中小型含む）株式ファンド

After reading this article with the above (1) and (2) options comparison:
https://amane-lancaster.blogspot.com/20 ... -slim.html

It seems that going for the "Only one fund" (EXE-I つみたてグローバル 中小型含む) approach could be good. Not much of a difference though.


**************************
***** SECOND TOPIC
**************************
Searching for a good candidate for the 20% for World Bonds Fund


I am struggling to find a good candidate within the SBI´s Tsumitate NISA Line-up here: https://www.sbisec.co.jp/ETGate/WPLETmg ... ineup.html

I have read about the ｅＭＡＸＩＳ 先進国債券インデックス fund (https://emaxis.jp/fund/250925.html), which looks fine to me, but it is not a part of the SBI lineup for the Tsumitate Nisa. Searching for the ""債券" text over the funds I was not able to find any fund based only in bonds like the ｅＭＡＸＩＳ 先進国債券インデックス. The lower cost fund that I found was "DCニッセイワールドセレクトファンド (債券重視型)", but it has the following composition:

国内債券 : 45%
国内株式(TOPIX) : 20%
先進国債券 : 20%
先進国株式 : 10%
短期金融資産 : 5%

Source: http://shintaro-money.com/nissay-world/

So I am wondering if I should stop going for the 20% bonds fund and try going 100% equities, but maybe it´s too risky (well, after 20 years doing regular contributions for the Tsumitate NISA, it should be okay I guess).

Any thoughts on the first (eMaxis slim 3 funds VS exe-i つみたてグローバル) and second topic (World bonds fund in SBI)?

Thank you in advance and sorry to post so many information together :-S

[adamu]

This was just the post that I was looking for!

- (1) Combing slim founds: 先進国 (50%)、新興国 (10%) and TOPIX/NIKKEI (20%)

- eMAXIS slim 先進国株式インデックス: https://blog.tacos-heaven.xyz/2018/03/3-11/
- eMAXIS slim 新興国株式インデックス: https://blog.tacos-heaven.xyz/2018/04/19-6/
- eMAXIS Slim 国内株式（TOPIX）: https://tsumitatetoushi.com/toushishint ... lim-jpkabu
- eMAXIS Slim 国内株式（日経平均）: https://tsumitatetoushi.com/toushishint ... lim-nikkei

Seems sensible. Some thoughts:
I don't think you need TOPIX and Nikkei. Maybe just go 20% TOPIX?

It seems that going for the "Only one fund" (EXE-I つみたてグローバル 中小型含む) approach could be good.

The current conclusion is that this fund is not a good idea because of poor tax handling. You can also make a cheaper equivalent portfolio yourself by combining developed and emerging market funds - as you wrote in (1).

[jcc]

I was thinking in trying 80% world equities (50% Developed, 20% Japan and 10% Emerging) and 20% for bonds (world bonds rather than only Japanese).

This is nearly identical to mine! Only difference is I only use developed countries for bonds(I think emerging market bonds are way too unstable, and JP bonds have like zero returns)

https://amane-lancaster.blogspot.com/20 ... -slim.html

I think that article isn't very good. It skips a lot of important stuff, and if they really wanted to calculate long term returns, they could have looked at the underlying ETF's or the indices.

EXE-i is structured as a fund of funds so you get triple taxation which sucks. And despite using such a structure it doesn't actually come out cheaper than "mixing your own" or just buying vanguard ETFs. I really don't like EXE-i :/

国内債券 : 45%
国内株式(TOPIX) : 20%
先進国債券 : 20%
先進国株式 : 10%
短期金融資産 : 5%

Source: http://shintaro-money.com/nissay-world/

That looks like a terrible fund to me, but I hate japanese bonds(shitty returns). And mixing stocks and bonds in one fund is just hard to keep an eye on your allocation.

So I am wondering if I should stop going for the 20% bonds fund and try going 100% equities, but maybe it´s too risky (well, after 20 years doing regular contributions for the Tsumitate NISA, it should be okay I guess).

Personally I think it's worth keeping a bond allocation but to explain fully why would take a lot of time(strongly recommend reading "random walk down wall street" and Bogles "common sense on mutual funds" which both discuss it). It also depends on your age.

As mentioned above, I personally only do developed nations bonds. Bonds are meant as a risk hedge, so putting money into bonds that are linked to countries with high currency volatility seems to defeat the point(I suspect this is also why there are few "real" global bond funds). And Japanese bonds just give no return at all because the japanese banks buy them at such low rates(this is partially due to the fiscal policy and laws that require them to hold a certain % of "safe" assets).

I like to use http://shintaro-money.com/index-cost/#i-6 as a quick list of the low cost index funds

For developed nations bonds, personally I use nissei's (confusingly named) offering <購入・換金手数料なし>ニッセイ外国債券インデックスファンド but tawara or emaxis slim would be fine too, and if the cost widens I might switch. Despite the index being tracked being called the "global index" it only covers developed nations.

[ivanpgs]

Hi jcc,

Personally I think it's worth keeping a bond allocation but to explain fully why would take a lot of time(strongly recommend reading "random walk down wall street" and Bogles "common sense on mutual funds" which both discuss it). It also depends on your age.

As mentioned above, I personally only do developed nations bonds. Bonds are meant as a risk hedge, so putting money into bonds that are linked to countries with high currency volatility seems to defeat the point(I suspect this is also why there are few "real" global bond funds). And Japanese bonds just give no return at all because the japanese banks buy them at such low rates(this is partially due to the fiscal policy and laws that require them to hold a certain % of "safe" assets).

I like to use http://shintaro-money.com/index-cost/#i-6 as a quick list of the low cost index funds

For developed nations bonds, personally I use nissei's (confusingly named) offering <購入・換金手数料なし>ニッセイ外国債券インデックスファンド but tawara or emaxis slim would be fine too, and if the cost widens I might switch. Despite the index being tracked being called the "global index" it only covers developed nations.

Thanks for the advise, actually it makes much more sense to focus on the developed nations bond fonds.

The problem is that the SBI つみたて NISA current fund lineup does not contain any fund for developed countries bonds.

Link here: https://www.sbisec.co.jp/ETGate/WPLETmg ... ineup.html

Which is very strange to me, as SBI has a large list of funds to choose.
In the link that you provided to me before (cool one btw!) there are 11 先進国債券 fonds:

1. eMAXIS Slim 先進国債券 インデックス
2. ニッセイ外国債券インデックス
3. たわらノーロード 先進国債券
4. iFree 外国債券インデックス
5. Smart-i 先進国債券 インデックス
6. 三井住友・DC 外国債券インデックス
7. SMT グローバル債券 インデックス
8. 外国債券 インデックスe
9. Funds-i 外国債券
10. eMAXIS 先進国債券インデックス
11. 日興インデックス ファンド海外債券 (ヘッジなし)

But none of them are a part of SBI つみたて NISA. Actually, if I search for the word 債券 only the following ones will appear:

1. ＤＣニッセイワールドセレクトファンド（債券重視型） 0.1944%
2. ニッセイ・インデックスパッケージ（国内・株式／リート／債券）（愛称：ファンドパック日本）0.30456%
3. ニッセイ・インデックスパッケージ（内外・株式／リート／債券）（愛称：ファンドパック７）0.34992%
4. 三井住友・ＤＣ年金バランス３０（債券重点型）（愛称：マイパッケージ）0.2376％
5. ＳＭＴ　世界経済インデックス・オープン（債券シフト型）0.486％
6. 楽天・インデックス・バランス・ファンド（債券重視型） 0.2646％程度

But all of them don't offer only bonds, but a cluster of different products (equities + bonds or equities + bonds + reit, etc). Furthermore, their exposure to Japanese bonds is too high.

Anyone using SBI for つみたて NISA can confirm that it does not offer 先進国債券 products?

Thanks again for your reply!