MAXIS ETFs vs eMAXIS Slim mutual funds

[EmaxisSlim Cultist]

I was not aware of a difference in tax treatment though, do you have a source for that?

Now, at what cost-basis do ETFs win out over Japanese dividend-reinvesting mutual funds I wonder? Or will they remain inherently supeior?

Please check out the earlier posts - they cover these points pretty well I think. First post has a source on the tax issue, Rakuten also have an explanation here.

By stock lending do you mean the customer personally lending the ETFs? Or the fund management lending the underlying stocks? If the latter, I don't know for sure but I don't think it would make any difference in this case. Both MAXIS ETF and eMAXIS Slim have the same mother fund apparently, i.e. all the underlying stocks are held as one together, so I cannot see there being a different lending strategy between the ETF and the mutual.

I understand the previous points. I was curious at what cost basis an ETF would outperform the matching fund. If the fees ever get as low as Vanguard funds, will they ultimately be the better choice? Also, I was referring to customer lending of ETFs by the way. Something you cannot due with trust/funds.

When it comes to DRIP there is hope, Monex has introduced it for foreign funds. https://info.monex.co.jp/news/2021/20210521_02.html

When it comes to creating an artificial dividend, this is what I was referring to. https://www.rakuten-sec.co.jp/web/rfund ... kyaku.html

The ecosystem seems more built around the funds at the moment. If we start to see reinvesting ETFs (ucits like), perhaps that will cause a major shift.

[TBS]

I understand the previous points. I was curious at what cost basis an ETF would outperform the matching fund. If the fees ever get as low as Vanguard funds, will they ultimately be the better choice? Also, I was referring to customer lending of ETFs by the way. Something you cannot due with trust/funds.

...

The ecosystem seems more built around the funds at the moment. If we start to see reinvesting ETFs (ucits like), perhaps that will cause a major shift.

It is difficult to make a general statement about what cost basis the ETF would outperform the mutual. It will depend on the average market growth in future, the average dividend yield, what both fund fees do in future (trend has been for fees to decrease). Likewise including stock lending profits, and reinvesting those, within a simulation is even more complicated, as this will depend on the marginal tax rate of the holder, when the interest is paid and can be reinvested, etc.

We can say, however, that 0.1% yearly interest from lending the ETFs to Rakuten/Monex won't have swung the balance over the last 2 years.

It is true that the recent strong market growth will have accentuated the better performance of the mutuals compared to the ETFs over the last 18 months. But attempting to answer your questions depends on too many ifs and unknowns to be worthwhile, I feel. The whole point about this thread was that now, under the current rules, the mutuals are definitely a better bet for long-term growth investors.

You are right, things may get better for the ETFs in future e.g. if automatic DRIP is added, or even better if brokers allow partial purchases of ETF units. Internally reinvesting ETFs seems the most unlikely change, however. Blogs I read suggest ETFs are required to make distributions, so it will require changes to the financial regulations.

問題は配当金の扱いです。ETFは配当金を出さねばならないルールになっており、MAXIS米国株式は年に2回出します。

[EmaxisSlim Cultist]

問題は配当金の扱いです。ETFは配当金を出さねばならないルールになっており、MAXIS米国株式は年に2回出します。

Oh, I see. If a change in legislation is necessary, then that is decades out in Japan.

The (mutual) fund structure here is really a great investment tool. So many ex-pats start investing here and refuse to consider mutual funds at first, convinced that the western norms about ETFs superiority remain true.

I also agree with Jack Bogle, mutual funds help investors avoid their worse tendencies. They help encourage passive, gradually investing and allow investors to ignore market swings. ETFs reinforce the opposite tendencies.

[TBS]

問題は配当金の扱いです。ETFは配当金を出さねばならないルールになっており、MAXIS米国株式は年に2回出します。

Oh, I see. If a change in legislation is necessary, then that is decades out in Japan.

It could happen, they changed the rules for the ETFs to fix double-taxation of dividends after all.

Good points on everything else. The fact that the mutual funds can reinvest internally and shift all the tax payments to the end is a real trump card.

p.s. This is all good news - I think your username is safe for the present

[goran]

Sorry for necroposting.

I was looking for options to park my emergency funds where it can grow at a rate higher than what Japanese banks call "interest rates", also with flexibility to liquidizing them within a day. Then I stumbled upon this thread.

What do others think about using MAXIS ETFs as a place to put my emergency funds (about 9-10 months of expenses)?
I believe same day transaction will be possible, in case I need some cash within a day or two, unlike emaxis Slim mutual funds.
I will still hold 2-3 months worth of expense in cash.

[Haystack]

Sorry for necroposting.

I was looking for options to park my emergency funds where it can grow at a rate higher than what Japanese banks call "interest rates", also with flexibility to liquidizing them within a day. Then I stumbled upon this thread.

What do others think about using MAXIS ETFs as a place to put my emergency funds (about 9-10 months of expenses)?
I believe same day transaction will be possible, in case I need some cash within a day or two, unlike emaxis Slim mutual funds.
I will still hold 2-3 months worth of expense in cash.

It would not be an emergency fund then, it would be an investment. Emergency funds are secure from market movements and liquid. Definitely not in stocks, but possibly in term deposits or some bond products.

What you are really saying is.

1. I have a 10 month emergency fund
2. I want to invest more than half of it.
3. This will reduce my emergency fund to 3 months.

The immediate settlement of an ETF vs the 2-3 days of a fund does not make it more secure or safe for short-term planning. The risks are virtually the same.

[goran]

It would not be an emergency fund then, it would be an investment. Emergency funds are secure from market movements and liquid. Definitely not in stocks, but possibly in term deposits or some bond products.

What you are really saying is.

1. I have a 10 month emergency fund
2. I want to invest more than half of it.
3. This will reduce my emergency fund to 3 months.

The immediate settlement of an ETF vs the 2-3 days of a fund does not make it more secure or safe for short-term planning. The risks are virtually the same.

Thanks for the response.

Yeah, I could rephrase my question as where should I put some money (instead of emergency fund) so that it can be accessible within a day, if required.
And it would have the potential to grow (unlike in my bank account)
Could maxis ETF be an option?
Or am I overthinking this?
(strictly thinking from ease of liquidating perspective, and ignoring the exposure to risk aspect)

[Haystack]

It would not be an emergency fund then, it would be an investment. Emergency funds are secure from market movements and liquid. Definitely not in stocks, but possibly in term deposits or some bond products.

What you are really saying is.

1. I have a 10 month emergency fund
2. I want to invest more than half of it.
3. This will reduce my emergency fund to 3 months.

The immediate settlement of an ETF vs the 2-3 days of a fund does not make it more secure or safe for short-term planning. The risks are virtually the same.

Thanks for the response.

Yeah, I could rephrase my question as where should I put some money (instead of emergency fund) so that it can be accessible within a day, if required.
And it would have the potential to grow (unlike in my bank account)
Could maxis ETF be an option?
Or am I overthinking this?
(strictly thinking from ease of liquidating perspective, and ignoring the exposure to risk aspect)

Ignoring the risk? Yes, very possible! ETFs settle instantly during market hours. Your broker will have a rule on how quickly they can deposit settled funds, check their FAQ.

[goran]

Ignoring the risk? Yes, very possible! ETFs settle instantly during market hours. Your broker will have a rule on how quickly they can deposit settled funds, check their FAQ.

How long does putting in the sell order for emaxis mutual funds, and getting the money into your bank account take? (never sold anything yet)
I assume it also depends on the broker. But generally, can you expect it to get settled within a week?

[Haystack]

Ignoring the risk? Yes, very possible! ETFs settle instantly during market hours. Your broker will have a rule on how quickly they can deposit settled funds, check their FAQ.

How long does putting in the sell order for emaxis mutual funds, and getting the money into your bank account take? (never sold anything yet)
I assume it also depends on the broker. But generally, can you expect it to get settled within a week?

Depends on the index

Domestic 2 business days ish?
Developed 2-4 days ish.
World 4-5 ish?

It depends on holdings and trading hours in multiple countries etc.

I suggest you send 1000 yen worth just as an experiment. Get. A sense for how it works.