Compound interest vs real world

[trajan]

Thanks @Tkydon but it's so over my head.

I can see in your signature (@TokyoBoglehead) that you have "Monthly Tsumutate -SBI - Via SMBC GOLD NL - SBI V Global Equity Index Fund".

Is that SMBC related to Prestia? I ask because I have an account with them but have never seen anything about investment other than currency related options.

With SBI you can invest monthly with an SMBC credit card and receive V-Points as.a bonus.

I do not bank with SMBC.

With my Gold card, I invest 5 万 monthly and get 500 V-Points. I can then reinvest these in my SBI account. Pretty sweet deal. I get paid to invest.

I get it now. Thanks.

[mighty58]

That link to the YouTube series on valuation was not particularly helpful, especially for a question like yours. You can safely ignore it.

Correct me if I'm wrong, but your primary question seemed to be, if I may paraphrase, "in the real world things don't go up in a linear fashion like in the compound interest calculator, right?"

And you are right about that. The markets go up and down. This is called volatility, and it's always there. Any given year, the stock market could be up 15%, or down 15%. And no one can predict beforehand what happens in any given year. However, when you zoom out and look at things with a long-term view (20-30 years horizon), you will find the stock market (using the SP500 index here) has historically gone up an average of 7%-8% per year. Therefore, although your growth will not be linear like in the calculator, because historically it has gone up more (much more) than it has gone down, we can safely rely on the power of compound interest to grow our investments. The actual rate of growth you achieve, however, will not be known until after the fact. Compound interest calculators are helpful to get a ballpark figure of where we might be in the future given certain assumptions. It's not perfect, but it's the best we can do to try and forecast.

[trajan]

That link to the YouTube series on valuation was not particularly helpful, especially for a question like yours. You can safely ignore it.

Correct me if I'm wrong, but your primary question seemed to be, if I may paraphrase, "in the real world things don't go up in a linear fashion like in the compound interest calculator, right?"

And you are right about that. The markets go up and down. This is called volatility, and it's always there. Any given year, the stock market could be up 15%, or down 15%. And no one can predict beforehand what happens in any given year. However, when you zoom out and look at things with a long-term view (20-30 years horizon), you will find the stock market (using the SP500 index here) has historically gone up an average of 7%-8% per year. Therefore, although your growth will not be linear like in the calculator, because historically it has gone up more (much more) than it has gone down, we can safely rely on the power of compound interest to grow our investments. The actual rate of growth you achieve, however, will not be known until after the fact. Compound interest calculators are helpful to get a ballpark figure of where we might be in the future given certain assumptions. It's not perfect, but it's the best we can do to try and forecast.

Appreciate it.

I worry most about ending up with less than I started with, which I logically understand inflation would do on its own against simple savings. But my lizard brain fights back anyway.

I'll see what my banks has to offer to dumb civilians and take it from there. I work with Prestia and MUFG. Perhaps I should open a Rakuten account too. You guys seem to like it.

[zeroshiki]

While not the worst idea, doing mutual funds with banks is not optimal because they try to steer you to more expensive funds and/or take a cut. Try to do the online brokers if you can stomach the effort.

[TokyoBoglehead]

While not the worst idea, doing mutual funds with banks is not optimal because they try to steer you to more expensive funds and/or take a cut. Try to do the online brokers if you can stomach the effort.

I agree, but MUFJ has Emaxis Slim, so that would be fine if that's was OPs wish.

If the the fees are standard a nISA and Ideco with Emaxis via MUFJ would be perfectly acceptable.

Some things are left on the table as far as points, and other incentives though.

[zeroshiki]

MUFG employees would be incentivized to offer you eMaxis offerings (and not slim) because of higher management fees so you'd have to be careful there too.

[trajan]

While not the worst idea, doing mutual funds with banks is not optimal because they try to steer you to more expensive funds and/or take a cut. Try to do the online brokers if you can stomach the effort.

Are these brokers Japanese or... what?

A specific recommendation would be great.

[goran]

While not the worst idea, doing mutual funds with banks is not optimal because they try to steer you to more expensive funds and/or take a cut. Try to do the online brokers if you can stomach the effort.

Are these brokers Japanese or... what?

A specific recommendation would be great.

Rakuten Securities (better if you are already in Rakuten points universe)
https://www.rakuten-sec.co.jp/

SBI Securities (I think you get some points back through SMBC cards)
https://www.sbisec.co.jp/ETGate

Monex (they also have some kind of points back system)
https://www.monex.co.jp/

These are the top 3 popular ones in the forum.

[trajan]

While not the worst idea, doing mutual funds with banks is not optimal because they try to steer you to more expensive funds and/or take a cut. Try to do the online brokers if you can stomach the effort.

Are these brokers Japanese or... what?

A specific recommendation would be great.

Rakuten Securities (better if you are already in Rakuten points universe)
https://www.rakuten-sec.co.jp/

SBI Securities (I think you get some points back through SMBC cards)
https://www.sbisec.co.jp/ETGate

Monex (they also have some kind of points back system)
https://www.monex.co.jp/

These are the top 3 popular ones in the forum.

Thank you very much.

When you guys speak about (broker or bank) "fees", these would be on the potential earning, not on the money invested itself...?

What I mean is that if the processing/maintenance fee is, for example, 0.1023％ and the investment earns 4%, the fee is taken from the earning 4%, right?

And if there is a loss, there is no fee?

Apologies if these questions are too basic. I feel like I'm going in circles a little bit.

[RetireJapan]

When you guys speak about (broker or bank) "fees", these would be on the potential earning, not on the money invested itself...?

What I mean is that if the processing/maintenance fee is, for example, 0.1023％ and the investment earns 4%, the fee is taken from the earning 4%, right?

And if there is a loss, there is no fee?

Apologies if these questions are too basic. I feel like I'm going in circles a little bit.

Fees are applied to the entire amount invested, regardless of whether it makes a profit or a loss.