Cash out from fund and invest in NISA?

[TBS]

Lots of figures have been quoted about the performance of this fund in this thread. But as of yet there's no comparison to act as a reference point.

Taking @Tkydon's figures and correcting a forex miscalculation, the fund has returned since Oct 2018 (yen based):

So, in 4 years the return would be (1.1)^4 growth x 1.1 forex -1 = 61%

After Tax 61% x (1 - 0.20315) = 61% x 0.79685 = approx 49%

After Tax (1+49%)^1/4 = approx 10.4% Net per annum.

MSCI All Country World Index has returned 60% over the same period, so 48% after tax and approx 10.3% net per annum.
S&P500 has returned 82% over the same period, so 65% after tax and approx 13.4% per annum.
All figures account for fees and dividend reinvestments.

The fund hasn't produced out-sized or stellar returns for this period compared to equities. So @northSaver don't necessarily feel bad about not investing back at the start, but good point about low volatility.

@outhouse_critic What happens now on cannot be known. The question of whether it's better to stay in or cash out is a balance of whether the fund will continue to perform or go bad... whether the opportunity cost of paying taxes on cashing out will be offset by a potentially better performing NISA product... whether you'd be filling your NISA anyway even if you didn't cash out...

One thing that hasn't been said but needs to be: high fees is historically a good predictor of investments that will under-perform long term.

History is littered with investment products that looked great initially then turn bad.

Full disclosure: I know nothing about this fund.

[Tkydon]

Nice catch on my Forex Typo, but it did make my hypothetical estimate more conservative... I actually think actuals may be more conservative still...

My intent was to show the working and allow the OP to do the actual calculations for himself.

Unfortunately, the Yen against the AUD has not benefitted from the same level of strengthening of the USD against the of Yen in the Dollar Milkshake...
Unfortunately, the weakening of Yen against USD will probably work against people making new investments in USD denominated assets if the Dollar weakens and the Yen strengthens significantly.

Initial Investment was probably (guess) AUD 50k, so with current Value of AUD 70k, all we would need is the Investment date to determine the TTB at the time of making the investment to correctly calculate the Yen amount invested, actual returns and CGT. Forex Gain may have been 0%

hypothetical estimate
(70k - 50k) / 50k = 40% for the AUD over the life of the investment

With rising Interest Rates in Aus and a constant roll-over of projects, the returns may be expected to increase, subject to funds under management being fully loaned out.

[mighty58]

If you're making an argument that the investment strategy is sound, then fine, but I must say it's a bit worrying how many posters here are enthusiastically citing this fund's past performance as an indicator of future performance.

[Tkydon]

Yeah, if the USD eventually weakens significantly, it could seriously impact the returns on any NISA investment made in USD denominated assets going forward...

[outhouse_critic]

Hi,
Thank you to you all for taking the time to help me on this matter. I have to admit, I’m not a ‘money-guy’ and a lot of what you write here I don’t fully understand, and I may be missing something important. I do know that it’s hard to suggest a ‘correct’ path to follow due to the nature of investments though I also appreciate the blunt answers as well, ie, “RUN!” LOL!

This idea sounds reasonable, tho:

“You would need to withdraw AUD70k / 5 = AUD 14k per NISA Year in order to cover the Capital Gains Taxes due and have the Y1.2M to input into the NISA, but the remainder would continue to grow if left in the fund, probably adding up to another half year of NISA contributions…”

If I’m getting this right, it means to take out about a fifth of the fund and open a NISA account with that, and then do same possibly next year, and the year after, or something like that…

If I do that does anyone know, once I get that money, would I have to wait before reinvesting it into a brand new NISA account? Ie, do I have to wait to pay taxes on it or can I just go ahead.

Thank you all again.

[TokyoBoglehead]

Hi,
Thank you to you all for taking the time to help me on this matter. I have to admit, I’m not a ‘money-guy’ and a lot of what you write here I don’t fully understand, and I may be missing something important. I do know that it’s hard to suggest a ‘correct’ path to follow due to the nature of investments though I also appreciate the blunt answers as well, ie, “RUN!” LOL!

This idea sounds reasonable, tho:

“You would need to withdraw AUD70k / 5 = AUD 14k per NISA Year in order to cover the Capital Gains Taxes due and have the Y1.2M to input into the NISA, but the remainder would continue to grow if left in the fund, probably adding up to another half year of NISA contributions…”

If I’m getting this right, it means to take out about a fifth of the fund and open a NISA account with that, and then do same possibly next year, and the year after, or something like that…

If I do that does anyone know, once I get that money, would I have to wait before reinvesting it into a brand new NISA account? Ie, do I have to wait to pay taxes on it or can I just go ahead.

Thank you all again.

The fact that you don't understand the associate risks, fees and the product you're invested in is concerning. (I state this without judgement).

This alone shows that Banner failed to properly inform and explain that this it's a concentrated risky investment. Tkydon seemingly has the best grasp of it it (thanks for the corrections), but information is hard to come by.

It's risky, and super concentrated (single sector, single country).

Ultimately, regardless of the opinions here if you cannot answer why you own this, you really shouldn't.

Take a month, read through Millionaire Teacher, Bogleheads Guide to Investing, and maybe Ben's nISA and Ideco books. Then comes back and make an informed decision.

[RetireJapan]

One thing I would recommend to OP is not to make any big changes. There is no need to. If you want to get started with regular NISA, you need to open an account pretty soon to use your 2022 allowance.

The maximum you can put in per year is 1.2m yen, so no need to move more than that for now. Once you have a better understanding of your options you can make a decision. There is no rush.

[Tkydon]

This idea sounds reasonable, tho:

“You would need to withdraw AUD70k / 5 = AUD 14k per NISA Year in order to cover the Capital Gains Taxes due and have the Y1.2M to input into the NISA, but the remainder would continue to grow if left in the fund, probably adding up to another half year of NISA contributions…”

If I’m getting this right, it means to take out about a fifth of the fund and open a NISA account with that, and then do same possibly next year, and the year after, or something like that…

If I do that does anyone know, once I get that money, would I have to wait before reinvesting it into a brand new NISA account? Ie, do I have to wait to pay taxes on it or can I just go ahead.

Thank you all again.

You can just go ahead. You don't need to wait.

If you can pay the tax out of other funds, then you could just withdraw the amount you need (AUD13.5k).
If not, you can withdraw enough to cover the NISA and the Tax (AUD14k).
A timeline might look like this: (assuming AUD stays at Y90)

Take out AUD13.5k now, you can invest the max Y1.2M in NISA before year end, you don't need to wait, just go ahead.
Pay the National and Reconstruction Capital Gains Tax for 2022 in Apr 2023 Kakutei Shinkoku

Early in 2023, take out AUD14k, to cover the tax above if needed (or AUD 13.5k), and invest the max Y1.2M in NISA Anytime in 2023. Again, you don't need to wait, just go ahead
The Capital Gains Residents' Taxes for 2022 will be included in your total Residents' Taxes for 2022, payable from July 2023 to June 2024
Pay the Tax for 2023 in Apr 2024 Kakutei Shinkoku

Anytime in 2024, take out AUD14k, to cover the tax above if needed (or AUD 13.5k) and invest the max Y1.2M in NISA Anytime in 2024. Again, you don't need to wait
The Capital Gains Residents' Taxes for 2023 will be included in your total Residents' Taxes for 2023, payable from July 2024 to June 2025
Pay the Tax for 2024 in Apr 2025 Kakutei Shinkoku

Anytime in 2025, take out AUD14k, to cover the tax above if needed (or AUD 13.5k) and invest the max Y1.2M in NISA Anytime in 2023. Again, you don't need to wait
The Capital Gains Residents' Taxes for 2024 will be included in your total Residents' Taxes for 2024, payable from July 2025 to June 2026
Pay the Tax for 2025 in Apr 2026 Kakutei Shinkoku

Anytime in 2026, take out AUD14k, to cover the tax above if needed (or AUD 13.5k) and invest the max Y1.2M in NISA Anytime in 2023. Again, you don't need to wait
The Capital Gains Residents' Taxes for 2025 will be included in your total Residents' Taxes for 2025, payable from July 2026 to June 2027
Pay the Tax for 2026 in Apr 2027 Kakutei Shinkoku

That accounts for the current AUD 70k, but it will have grown to maybe another whole year's NISA amount...

Anytime in 2027, take out the remaining balance, and invest in NISA Anytime in 2023. Again, you don't need to wait
The Capital Gains Residents' Taxes for 2026 will be included in your total Residents' Taxes for 2026, payable from July 2027 to June 2028
Pay the Tax for 2027 in Apr 2028 Kakutei Shinkoku

The Capital Gains Residents' Taxes for 2027 will be included in your total Residents' Taxes for 2027, payable from July 2028 to June 2029

[captainspoke]

One thing I would recommend to OP is not to make any big changes. There is no need to. If you want to get started with regular NISA, you need to open an account pretty soon to use your 2022 allowance.

The maximum you can put in per year is 1.2m yen, so no need to move more than that for now. Once you have a better understanding of your options you can make a decision. There is no rush.

This.

But the fund does have a 90-day lag between request for redemption and the funds being disbursed. Assuming OP has some cash to get this year's NISA started, they should consider redeeming enough for 2 yrs worth of NISA contributions--¥2.4M.

Then OP could pay their own money back (this year's 1.2M that they'd be fronting--maybe from an emergency fund?--till the redemption came thru), and have enough for 2023's NISA contribution, too.

And besides the 90-day redemption structure, it may also take another week (or few?) to get the money here from banner.

Taxes. Doing ¥2.4M at once would probably put it all (any gains) in the 2022 tax year. OP may want to do that, or split it into 1.2+1.2 so that the second one would come in 2023.

**

I'd second some of the comments above, this investment is far from being a disaster. The fund performance to date seems as good or better than some other things that OP could have stumbled into, and the AUD that this is likely denominated in has at least done better than the yen.

[northSaver]

But the fund does have a 90-day lag between request for redemption and the funds being disbursed.

I think the redemption is monthly, based on the latest PDF I have. We can conclude that he's in the Isle of Man fund because the minimum investment for the Australian one is AUD500,000.