NISA - portfolio for the longest term

[ChapInTokyo]

...
I hadn’t really given it much thought to be honest, ...

My impression is that you might spend too much time on some of these meanderings.

... so I asked Bing “ is investing in the Dow jones industrial average index better than investing in the s&p500?” and this is what Bing came up with. So maybe it’s like if I can’t be sure which is the winner, invest in both?

Investing in the Dow Jones Industrial Average (DJIA) versus the S&P 500 depends on your investment goals and preferences. Here's a comparison to help you decide:
snip...

My Comment: (since I seem to have botched the editing of the quotes)

So bing is absolutely no help. (who'da thought!!)

And since ALL/100% of the dow is contained in the S&P500, buying both would be a great example of over-diversification.

"Over-diversification, or "di-worsification," occurs when additional investments diminish returns without lowering risk significantly."

And the same situation with Nikkei/Topix

You _could_ think of the more concentrated, and curated Dow and the Nikkei225 as sort of like ultra low cost active index funds? How else to explain the outperformance of the S&P500 by the DJIA (cf. this chart from the article "Comparing Iconic Indices"from the official S&P Dow Jones Indices site!):

Comparing Iconic Indices:The S&P 500® and DJIA®
https://www.spglobal.com/spdji/en/docum ... d-djia.pdf

[Tsumitate Wrestler]

Do not rely on LLMs quite yet, lest you be lead astray.

The following should clear up any confusion.

Source: https://www.cmegroup.com/education/cour ... topix.html

Comparing the TOPIX Index with the Nikkei 225 Stock Average
While the TOPIX is a key cap weighted broad-based benchmark of Japanese stock prices, financial markets also focus on the Nikkei 225 Stock Average. The Nikkei 225 is a price-weighted average of the 225 top-rated Japanese companies listed in the First Section of the Tokyo Stock Exchange (it excludes REITs, preferred stocks and ETFs). As such, higher-priced stocks have a greater weighting in the index while the TOPIX is influenced by high-capitalization companies. The Nikkei 225 is also used around the globe as the premier index of Japanese stocks. Both the Nikkei 225 and the TOPIX are key benchmarks of Japanese equity prices despite their differences in methodology.

However, I still do not think chasing a dividend paying ETF is a wise plan.

Buy a broad market investment trust, sell when you need the income.

It is just so much simpler.

[ChapInTokyo]

Do not rely on LLMs quite yet, lest you be lead astray.

The following should clear up any confusion.

Source: https://www.cmegroup.com/education/cour ... topix.html

Comparing the TOPIX Index with the Nikkei 225 Stock Average
While the TOPIX is a key cap weighted broad-based benchmark of Japanese stock prices, financial markets also focus on the Nikkei 225 Stock Average. The Nikkei 225 is a price-weighted average of the 225 top-rated Japanese companies listed in the First Section of the Tokyo Stock Exchange (it excludes REITs, preferred stocks and ETFs). As such, higher-priced stocks have a greater weighting in the index while the TOPIX is influenced by high-capitalization companies. The Nikkei 225 is also used around the globe as the premier index of Japanese stocks. Both the Nikkei 225 and the TOPIX are key benchmarks of Japanese equity prices despite their differences in methodology.

However, I still do not think chasing a dividend paying ETF is a wise plan.

Buy a broad market investment trust, sell when you need the income.

It is just so much simpler.

To my mind both mutual funds and ETFs are based on stocks, and stocks pay dividends. The reason people pay to own stocks is to get dividends so chasing dividend paying ETFs seems pretty straightforward when you’re retired and relying on that income.

The downside of having to sell off mutual funds regularly, through good market and bad is that it will feel really depressing having to sell when the market has crashed. It will be like dollar cost averaging in reverse won’t it? That’s probably what I don’t like about that way of doing things it is probably irrational but there you are.

[Tsumitate Wrestler]

The reason people pay to own stocks is to get dividends so chasing dividend paying ETFs seems pretty straightforward when you’re retired and relying on that income.

I am afraid you have a pretty fundamental misunderstanding then.

The average yearly return of the S&P 500 is 10.62% over the last 100 years, as of the end of April 2024. This assumes dividends are reinvested. Dividends account for about 40% of the total gain over this period.

Most of the growth in the market is not from dividends. At best, helf is.

An investor should target growth and dividends together.

[sutebayashi]

It's interesting though that even though they're making a song and dance about their 0 commission dollar yen conversions, the small print does say that there is actually a BID-ASK spread

Yes, but when the spread is so narrow, it becomes almost meaningless to think about - more than the spread, the timing of your transaction will take on most significance, but most people aren’t forex day traders, so you can think of it as a coin flip.

The forex rate could move something like 0.50 for or against you on a given day, so once the spread is within that kind of degree, it’s not something I worry about.

[ChapInTokyo]

The reason people pay to own stocks is to get dividends so chasing dividend paying ETFs seems pretty straightforward when you’re retired and relying on that income.

I am afraid you have a pretty fundamental misunderstanding then.

The average yearly return of the S&P 500 is 10.62% over the last 100 years, as of the end of April 2024. This assumes dividends are reinvested. Dividends account for about 40% of the total gain over this period.

Most of the growth in the market is not from dividends. At best, helf is.

An investor should target growth and dividends together.

Yes yes I understand all that. The difference is that I want to have current income from ETF dividends as well as future potential capital gain from economic growth.

In that respect if I were to sell off enough mutual fund shares every 3 months to generate an equal amount of income as I would get from ETF dividend distributions, the NAV of the mutual fund holdings will decrease by the same amount as the NAV of the ETF after distributing dividends. I really don’t see any difference except that dividends are paid automatically whereas selling mutual fund shares at Monex will entail a few taps of the keyboard.

[Tsumitate Wrestler]

The reason people pay to own stocks is to get dividends so chasing dividend paying ETFs seems pretty straightforward when you’re retired and relying on that income.

I am afraid you have a pretty fundamental misunderstanding then.

The average yearly return of the S&P 500 is 10.62% over the last 100 years, as of the end of April 2024. This assumes dividends are reinvested. Dividends account for about 40% of the total gain over this period.

Most of the growth in the market is not from dividends. At best, helf is.

An investor should target growth and dividends together.

Yes yes I understand all that. The difference is that I want to have current income from ETF dividends as well as future potential capital gain from economic growth.

In that respect if I were to sell off enough mutual fund shares every 3 months to generate an equal amount of income as I would get from ETF dividend distributions, the NAV of the mutual fund holdings will decrease by the same amount as the NAV of the ETF after distributing dividends. I really don’t see any difference except that dividends are paid automatically whereas selling mutual fund shares at Monex will entail a few taps of the keyboard.

We are a bit all over the place, but your original plan to use a Nikkei 225, would only give you 1.5% dividend annually. Would that supplement your retirement?

I don't see how this this plan would work unless you have a very large nestegg to devote to it.

...

If you hunt down dividend etfs or covered call etfs you can find more yield, but as a result you accept more risk and less diversification.

So we are back to just pressing a few buttons every few months.

[captainspoke]

The chart at the top of the page comparing the Dow and S&P500 seemed off--perhaps since it only goes up to June 2021 (or perhaps only to a little earlier than that?).

This is what yahoo finance shows, going from mid/late 2010 to the present

If that comes thru, notice that the S&P500 has very much outperformed the Dow over the last 14yrs or so.

[Tsumitate Wrestler]

If that comes thru, notice that the S&P500 has very much outperformed the Dow over the last 14yrs or so.

Google finance is good for this. Here is the five year snapshot.

Do not trust A I at present. It's pulling from Reddit these days.

https://g.co/finance/.DJI:INDEXDJX?wind ... XSP%3A.INX

[ChapInTokyo]

I am afraid you have a pretty fundamental misunderstanding then.



Most of the growth in the market is not from dividends. At best, helf is.

An investor should target growth and dividends together.

Yes yes I understand all that. The difference is that I want to have current income from ETF dividends as well as future potential capital gain from economic growth.

In that respect if I were to sell off enough mutual fund shares every 3 months to generate an equal amount of income as I would get from ETF dividend distributions, the NAV of the mutual fund holdings will decrease by the same amount as the NAV of the ETF after distributing dividends. I really don’t see any difference except that dividends are paid automatically whereas selling mutual fund shares at Monex will entail a few taps of the keyboard.

We are a bit all over the place, but your original plan to use a Nikkei 225, would only give you 1.5% dividend annually. Would that supplement your retirement?

I don't see how this this plan would work unless you have a very large nestegg to devote to it.

...

If you hunt down dividend etfs or covered call etfs you can find more yield, but as a result you accept more risk and less diversification.

So we are back to just pressing a few buttons every few months.

Well 1.5% of the NISA Growth quota of 14 million yen is 210,000 tax free yen a year so that'll be 17,500 yen a month to supplant the approximately 175,000 yen a month pension by 10% without selling any ETF shares in the NISA account until the taxable accounts have been depleted and it becomes necessary to sell the ETFs in the NISA. Hopefully the underlying equities will have increased in value to keep pace with inflation!

Oh and when I start selling off the NISA account, there'll also be the 6 million yen worth of mutual funds in the tsumitate section which would have remained totally untouched over the years so that they'll compound to a respectable sized amount,