Scattershot NISA Questions.

[Crudzilla]

Hello Everyone.
TLDR - I have a tendency to be wordy, feel free to just answer the questions in bold.

Firstly I'd like to say a huge thank you to the Retire Japan Youtube channel (I also bought the NISA book) & also this forum. I'm quite late to the game regarding investments, and cringe at the thought of the cash I have left sitting in my Japanese bank account over the past decade. But thanks to you all, I now have a fully set up Rakuten Securities account and a connected Yucho current account to facilitate transfers, and I feel much happier and assured about my financial future in Japan.

I am preparing to transfer those savings into NISA, keeping things simple with the mix of the eMaxis Slim All Country & Developed Countries Bonds that seems like a good place to start out. I just have a few more questions, one more broad strategies based, and a few on the mechanics of the account:

1. For other people primarily using these investements, what is your ballance between the mutual & bonds? I saw some strategies mentioned in either the videos or books, like 'your age in bonds' or 'your age -10 in bonds' etc. I'm tempetd to go with a more aggressive ballance as I still have quite some years ahead of me before retirement. Would it (in your opinion) be foolhardy to say... fill my first 2 years of NISA with purely mutual funds and then bring some ballance to it by adding bonds later?

2. Do Tsumitate transfers have to be re-established each year? I saw a video about setting up the Tsumitate portion of the new NISA. It was saying that the transfers have tobe set up by a certain date in December to apply from January. Is that something that has to be done at the end of each year? Or was that just in the video because of the introduction of the new accounts in 2024?

3. How many times can top up 'bonus' payments into the Tsumitate portion be made? Is it only once per year? Or is it unlimited? Once my savings are transferred (it will fill this year's allowance and about a 3rd of next years), I'm planning on only adding 50k per month via Tsumitate and topping it up occasionally when my cash savings exceed a certain amount. I'll probably just top up using the 'Growth' portion which I will not be filling after those inital transfers, but I'm curious to know.

4. What is Rakuten Cash and is it worth using it/ a Credit card to make investment purchases? I'm assuming its another electronic walet ala PayPay etc? Because the account my sallary gets paid into is a backwater local bank, it is actually something of convoluted process to get money into my NISA. Local Bank -> Cash -> Yucho -> Rakuten Securities -> NISA. Basically I have to move money into my Yucho account manually each month via ATM before I can proceed electronically. I guess replacing Yucho with Rakuten Cash would not make my life any more difficult, and it might get me some extra points which can also be spent on further investments? The same goes for a CC though I am not confident about getting one as Rakuten already turned me down for even a bank account (hence the Yucho account).

5. Finally I have some quetions regarding some U.K. based investments and the sense in moving a portion of them to Japan. But I think that is best left to a separate post.

Thanks so much for your help!

[Butterball]

Well, I'll have a go at 1. A simple 2-fund mix of All-Country stocks & developed bonds is a great way to go.

As far as your overall balance between equities (stocks) & bonds goes, most people feel that the advice of your age or your age-10 in bonds is outdated and overly conservative (ie too bond-heavy), but this depends on your personal risk tolerance.

More typical advice these days is more along the lines of holding 70-80% in equities until you're 10 years or so away from retirement, and then starting to ramp up the bonds a moderate amount. Again, depends on your risk tolerance and many people feel that this too is needlessly conservative. Personally, if you're still pretty far from retirement and you're confident you won't panic sell when the market crashes, and you have an emergency fund, I wouldn't hesitate to be more aggressive. FWIW, many studies find that the ideal equities balance over the long term is quite high, say 80-100%, but also that there isn't much performance advantage between the upper and lower parts of that range.

It sounds like you have enough money on hand to max out your NISA and have money left over to invest in your tokutei account. Since NISA is tax-free, it's most beneficial when the investments with the highest expected return (equities) are there. So for example, if you had ￥10m to invest and had decided on an 80/20 stock/bond balance, you would just fill up your ￥3.6m NISA allowance with equities, and you could buy ￥2m of bonds and ￥4.4m of equities for your tokutei account to get your overall 80/20 mix.

[Crudzilla]

Thanks for the response. I too was feeling that, with retirement not on the immediate horizon, a heavy 30-40% in bonds was very conservative. I know myself, and know I won't panic in a crash, and I have that emergency fund. I think switching to higher stability only when you know you will be needing the money after, say 5 ot 10 years, makes a lot of sense.

Regarding the division of accounts; While I will max out the NISA this year, and perhaps next, due to my savings, that definitely won't be the case after that (I'd likely be filling around half the quota each year). But your post has got me thinking...

Even if I'm not filling the NISA would it be better to still buy bonds in the taxable account in the knowledge that the NISA will one day be filled? I'm thinking not... Assuming I finally fill my NISA with a 80-20 split in the NISA account, it would be easy enough to increase the bond ratio within the annual 3.6m limits. And if I was still earning at that point, it would be also be easy enough to convert my entire NISA to equities and buy bonds in the taxable account at that time. Right?

Thanks again for your input.

[beanhead]

On 1) there is lots of discussion here about bonds. The forum search function is not great so Google is probably easier.
The specific question to answer is whether overseas bonds/US-denominated bonds make sense to an investor in Japan buying with yen. The jury is still out.

I would certainly keep bonds out of the NISA. NISA is for assets which you hope to grow, as you will then enjoy the benefits tax-free. Bonds may have a role in your portfolio, but growth is not what they are there for. They will 'drag down' the value of your portfolio.

[zeroshiki]

Let me try to answer:

1. I have quite a ways to go before retirement so I'm in 100% equities. It does take a lot of willpower not to panic during market downturns but once you get it out of your system (set and forget is the best strategy) long-term equities work. Even if you do bonds or REITS, as beanhead has mentioned, don't do bonds in NISA because its a waste of the tax-free allowance.

• No. If you set it up to 50k a month for eMaxis Slim All-Country for example, it will just roll-over into the next year. With the New NISA this year, everyone had to adjust their tsumitate settings but I have another one in my Tokutei account that I haven't touched in years.

• You can do it 2x a year in Rakuten. Remember, the point of tsumitate is to do DCA. If you want to do spot purchases then using the growth NISA allocation is for the better.

• Rakuten Cash is Rakuten's convoluted e-money system that works with Rakuten Pay among other things. It won't solve your problems. It's very odd that you got rejected for Rakuten Bank though, I've almost never heard of this happening. Did you apply for the Bank account with the CC? Maybe try just the bank account by itself.

[sutebayashi]

Even if I'm not filling the NISA would it be better to still buy bonds in the taxable account in the knowledge that the NISA will one day be filled? I'm thinking not... Assuming I finally fill my NISA with a 80-20 split in the NISA account, it would be easy enough to increase the bond ratio within the annual 3.6m limits. And if I was still earning at that point, it would be also be easy enough to convert my entire NISA to equities and buy bonds in the taxable account at that time. Right?

Yes, I think so.

I did just this with my old legacy NISA. I wasn’t filling it each year at the beginning, so I just bought everything in NISA. As years went by NISA was full and I let the bonds roll out to tokutei account at the end of the year to leave room for new equity purchases in the new year, when I needed to.

With modern NISA you’ll have to sell those bonds out of NISA yourself towards the end of the year, before the year that you want to have created space for equities.

Bonds don’t make big money but I do believe this can avoid some potential tax.

[Tkydon]

Hello Everyone.
TLDR - I have a tendency to be wordy, feel free to just answer the questions in bold.

Firstly I'd like to say a huge thank you to the Retire Japan Youtube channel (I also bought the NISA book) & also this forum. I'm quite late to the game regarding investments, and cringe at the thought of the cash I have left sitting in my Japanese bank account over the past decade. But thanks to you all, I now have a fully set up Rakuten Securities account and a connected Yucho current account to facilitate transfers, and I feel much happier and assured about my financial future in Japan.

I am preparing to transfer those savings into NISA, keeping things simple with the mix of the eMaxis Slim All Country & Developed Countries Bonds that seems like a good place to start out. I just have a few more questions, one more broad strategies based, and a few on the mechanics of the account:

The Benefit of NISA is that you can withdraw money any time you like tax free, BUT, you pay in Post Tax income,and so get no tax benefit in the year in which you make the contributions, and there are Yearly and Lifetime Limits.
If you expect to need money before retirement, then OK, BUT if you plan to let it ride until at least 60, then you may be better off putting money into iDeCo first.

The Benefit of iDeCo is that the money you pay in to iDeCo is Tax Free when you pay it in, BUY you can't get at that money until you retire.

If you combine the two, then you can max out iDeCo and pay the contributions every month out of Post-Tax Income, BUT you will receive a Tax Refund for the Tax paid on that money at the End of Year Adjustment - Nenmatsu Chousei - or after Tax Filing - Kakutei Shinkoku.
This should be the total iDeCo Contributions / Marginal Tax Rate - total iDeCo Contributions.
iDeCo distributions will be taxable in retirement...

This Refund is Tax Free and you can then sweep the refund into NISA, Tax Free on the Way In and On The Way Out.