Completely green, overwhelmed and intimidated.(Nisa)

[shinzokinzo]

Hello there!

To make a long story short, prior to moving to Japan I worked a succession of minimum wage jobs, and couldn't afford a pension let alone even consider investments. My family wasn't well off, none of us know thing one about anything like this. Living and working here, I'm the most well off I've ever been. While I'm not making an obscene amount of money, it's certainly the most I've ever made and I've been saving away about a third of my salary every year. It feels silly having a chunk of money sitting in an account earning virtually no interest, and high interest savings accounts don't appear to be a thing in Japan, which is how I came to learn about Nisa. I've found it difficult to find any information on it for people like myself who know noooothing about this stuff.

It seems like a sensible idea to try and make my money earn some more money, but the risk aspect of things makes me so nervous. I'd be galled if I invested the money I've been saving away and ended up losing it. Equally, I'd be thrilled to earn some more money for my future!

I have a whole bunch of questions.
As I understand it, a Nisa account allows you to invest money. Money earned from investments made from a Nisa account is tax free for five or twenty years. It's good to buy stock in many different companies. That much makes sense to me, but beyond that, I honestly don't understand a thing.
How on EARTH does one decide which stocks/bonds to buy?
Does Nisa have a list you can decide from, or are you free to buy any stock you want?
Is it something you need to actively watch over, and sell your stock at a good time, or is there a way to make it more passive?
Buying stock is risky, and I understand there are many variables, but in general how likely is it that one would lose everything they invested?
I've often heard that it's a long term investment, but why is that? Is it often the case that you buy stock, then sell it many years later, the money you invested being gone from your account in the meantime?
Just a for instance, If I were to open a 5 year Nisa with the maximum amount and invest all that money, (If it's even possible to predict!) how long would it be before I saw a return on it?

These kinds of things must get asked ad nauesum, so thank you so much to anyone who takes the time to help me out!

[RetireJapan]

We're going to be launching an online course soon for beginners on all aspects of personal finance in Japan (but focusing on saving and investing). Sign up to the mailing list and look out for that, it might be of interest

[mighty58]

Congrats on coming to a position where you can start asking the right questions. They're all good questions, will take a stab at answering:

How on EARTH does one decide which stocks/bonds to buy?

>> The best way is to NOT decide which stock to buy. It's very difficult to predict which companies will be the winners. Great company's can have bad stock performance, and vice versa. So instead of picking stocks, you buy what's called an index fund. An index fund is a basket of ALL stocks.

Does Nisa have a list you can decide from, or are you free to buy any stock you want?

>> You are free to buy whatever you want within the regular NISA account. Buy again, you should stick to index funds.

Is it something you need to actively watch over, and sell your stock at a good time, or is there a way to make it more passive?

>> No need to actively watch over it. In fact, you probably shouldn't as the markets always go up and down in the short term, and you might not handle it well mentally. So buy it, then check your progress once a year.

Buying stock is risky, and I understand there are many variables, but in general how likely is it that one would lose everything they invested?
I've often heard that it's a long term investment, but why is that? Is it often the case that you buy stock, then sell it many years later, the money you invested being gone from your account in the meantime?

>> Individual companies are indeed risky, they can go bankrupt, for example, taking your stock to zero. That's why you want index funds, where you buy the entire market. By buying the entire market, you reduce the risk (to your own money) of any single company going bankrupt, as it doesn't really affect you.
>> Buying stocks is extremely risky if you are looking to make short-term returns. Nobody (not even the pro's who profess to do so!) can accurately predict short-term ups and downs. However, long-term (10-15 years+), the stock market has consistently gone up. The longer you are in the market without jumping in and out, the better your gains.
>> Therefore, determine what game you are trying to play. Are you investing money for the short term or for the long term? Short term is more aking to gambling. Long term is real "investing".

Just a for instance, If I were to open a 5 year Nisa with the maximum amount and invest all that money, (If it's even possible to predict!) how long would it be before I saw a return on it?

>> Nobody knows that. The real question is, if you saw a 5% or 10% gain tomorrow, what would you do? Would you sell it? If you would, you're playing the short-term game, and that's a game you will ultimately lose.

[goodandbadjapan]

I felt very much like you when I started. I read everything I could here and then I basically copied what others who seemed to know much more than me were doing! By that, I mean I just invested in index funds - first a developed country emaxis fund, an emerging market emaxis fund, a Japan emaxis fund and a bond fund. Later, I just bought the emaxis all country fund and pretty much still do. I don't own any individual sticks at all. As for watching over things - I do keep an eye on things but five years in and I haven't yet sold anything at all. You might buy and then see a 10% drop the next day and you might even be down for some time, but just don't panic and leave stuff and it will likely come good. My 2022 Nisa is only up a grand total of ¥12 because I invested the full amount in January, when markets were still quite high but my four NISA years before that are all up between about 40 and 85%. My portfolio can easily fluctuate by half a million yen or more in a single day, but you learn not to get over excited when it goes up, or worry when it goes down. So, don't panic, read lots of the threads on this forum, probably sign up for a meeting with Ben, and just start slowly, investing small amounts until you get the hang of it and see how things that go down one day may well be back up the next etc. If you are really worried, before you buy just ask on here to make sure you are not making a massive mistake. It's very unlikely you will be. It's daunting to get started, but once you get over that first stage it gets a lot easier! Best of luck. You're on the right path by asking questions on here.

[TokyoBoglehead]

My advice:

Read this first. The Little Book of Common Sense Investing: - John C. Bogle

https://www.amazon.co.jp/-/en/John-C-Bo ... 151&sr=1-1

....

Understand the basics, before you examine the Japanese system. This will only take a day or so to read, so it is a small delay!

Then Read Bens Nisa/iDeco guide, or sift through the forum/wiki.

For 99% of people that will be enough to understand the system.

....

If you are impatient, you can start with the application before you decide on funds. Nisa/iDeco applications take a while! Rakuten/Monex or SBI, cannot go wrong.

[beanhead]

Understand the basics, before you examine the Japanese system. This will only take a day or so to read, so it is a small delay!

Totally agree.
I didn't read Bogle's book, just spent a bit of time on the bogleheads site and read a lot of articles such as this one below:

https://theonepursuit.com/2021/07/22/wh ... ohn-bogle/

One you understand the general approach, reading most of this site will help with the Japanese context.

Hint/shortcut: buy one of the eMaxis Slim funds, probably All-Country. If it is not available, for example in your iDeCo, get the closest thing, which will be another no-load diversified fund by Vanguard or Tawara or similar...

[zeroshiki]

I think the biggest block to get over is the risk. No one can guarantee you that the world economy won't crater and bring down all your investments with it. Its a calculated risk you'd be taking but its considered less risky than pretty much all the other alternatives. There's no free lunch but if your view is long-term there's a good chance you can come out positive.

[adamu]

Echo what the others said above.

The first step is education. Spend a month or two reading about investing in general, and then about doing it from Japan. Ask more questions if you have them. There is no rush to get started. Investing is *not* risk free. You can have significant periods where your numbers are negative, usually while the world is on fire at the same time, but in the long term, the odds are in your favour. That's why it's a long-term game, and why it's so important you understand that before you start, to avoid you selling out during the tough times.

Some reading I recommend:

1. Bogleheads® investment philosophy
2. Is active investing a zero sum game?
3. The Simple Path to Wealth

And of course https://retirewiki.jp

[Bubblegun]

Welcome to the group. You'll get a lot of help here for sure.

I had similar thoughts to you about stocks and shares, and funds but as the others said, you don't need to be an expert to invest if your putting it in a fund. Check YouTube on Warren Buffet. He admits that himself and he should know.
Nothing is risk free, but it seems that "TIME" IN THE MARKET will always beat TIMING the market. So if you have time on your side, you should be ok.

zeroshiki » Sat Aug 13, 2022 1:21 pm

I think the biggest block to get over is the risk. No one can guarantee you that the world economy won't crater and bring down all your investments with it. Its a calculated risk you'd be taking but its considered less risky than pretty much all the other alternatives. There's no free lunch but if your view is long-term there's a good chance you can come out positive.

I would add CALCULATED RISK. Risk is there, but time heals.Historically that is! Invest and rest.

I went with Vanguards S&p500 for my IDECO.
Vanguard Global Balanced fund for my kids.
eMaxi S&P500 index.

The best book I read was millionaire teacher, and the richest man in Babylon.
https://www.amazon.co.jp/s?k=millionair ... ptance_1_8