Rakuten advice (first time Ideco)

[RetireJapan]

I don't have such a big problem with the Vanguard ETF wrappers

The fees seem reasonable even with the markup, and the main disasvantage seems to be the US taxing all of the dividends (rather than the 60% or so of US stocks in something like the eMaxis all-country). Only adds a tiny cost to the annual management fees.

But I may be wrong. I usually am

[Michel]

I don't have the knowledge nor the ability to do such calculations but has someone done the math?
The mark up and the additional tax burden compared to its performance (then again past performance can't be taken as a basis for future returns) but are the VT provided by rakuten too heavy to be sensible investment vehicles?

[AreTheyTheLemmings?]

Can I barge in with a question?

When you say...

the tax issues [of] the Vanguard tie-ups

...I assume you're referring to this:

the US taxing all of the dividends

Can you point me in the direction of more information on this?

Thanks in advance.

[RetireJapan]

Can I barge in with a question?

When you say...

the tax issues [of] the Vanguard tie-ups

...I assume you're referring to this:

the US taxing all of the dividends

Can you point me in the direction of more information on this?

Thanks in advance.

Ha, ha, didn't really want to get into this as I don't know enough about it to answer properly

In a nutshell, the US insists on levying a withholding tax on dividends from US-listed stocks/ETFs. This can be as high as 30%, but in Japan the tax treaty reduces that to 10%.

What this means for the issue at hand (Rakuten-wrapped Vanguard VT ETF vs. Japan-listed eMaxis Slim mutual fund) is that 100% of the Rakuten-wrapped ETF dividends would be subject to US withholding tax, while only (?) 60% or so of the eMaxis Slim mutual fund would be (because the US is about 60% of the world stock market by value). Dividends are probably around 2% for broad market index funds, so an extra 10% tax on that adds 0.2% to the annual cost of the fund. However, the Japanese equivalent is paying 60% of that anyway, so the real difference is 0.08%.

Which is why this issue doesn't really bother me all that much

Please feel free to point out if I got this wrong, by the way. There are always new things to learn...

[TokyoWart]

The only thing I can add to RetireJapan's response is my understanding is that the US taxes dividends but not capital gains for foreigners holding US securities so while the dividends get that haircut, capital gain distributions (or capital gains you might have from directly trading US stocks) don't get the automatic US withholding. That makes growth index funds (low dividends, sometimes substantial capital gains) and actively managed funds (more likely to generate capital gain distributions) a little more tax efficient than they otherwise would be.

[adamu]

What this means for the issue at hand (Rakuten-wrapped Vanguard VT ETF vs. Japan-listed eMaxis Slim mutual fund) is that 100% of the Rakuten-wrapped ETF dividends would be subject to US withholding tax

Rakuten's job* with their VT wrapper is to make a global index fund available to Japanese investors looking to buy without worrying about the implications of buying foreign shares directly. While buying in yen and being eligible for iDeCo / Tsumitate NISA are the obvious benefits, surely doing something clever with the dividend taxation should also be part of that? I am really hoping they do something to handle it, but none of their marketing material discusses that. It seems they are just relying on the inertia of people with iDeCo/Tsumitate NISA going "oh, has Vanguard in the name, global, pretty cheap, I'll go for that" without investigating what they are buying.

I really should find the time to read the prospectus more, and compare this fund with the alternatives, and VT directly.

*according to me. According to them, it's probably something more like: try to cover costs as much as possible, and use it as a loss-leader to try to convert as many customers as possible to more profitable products.

[AreTheyTheLemmings?]

Thanks for responding. Much appreciated.

[Inakappe]

Hey there,
I know this thread hasn't been active a while now.
I'm just about to rebalance my Rakuten ideco account.
I have 20% Tawara NoLoad Developed country bonds.
The remaining 80% is 40% Rakuten Zensekai Index fund (0.212%) and 40% Tawara No Load Developed countries (0.109%).
I realise there is overlap with Rakuten and Tawara. Is it better to go with just one?
Are there advantages/disadvantages of splitting the two like above?

Thanks in advance.

[EmaxisSlim Cultist]

Hey there,
I know this thread hasn't been active a while now.
I'm just about to rebalance my Rakuten ideco account.
I have 20% Tawara NoLoad Developed country bonds.
The remaining 80% is 40% Rakuten Zensekai Index fund (0.212%) and 40% Tawara No Load Developed countries (0.109%).
I realise there is overlap with Rakuten and Tawara. Is it better to go with just one?
Are there advantages/disadvantages of splitting the two like above?

Thanks in advance.

I myself am 100% Rakuten/Vanguard VT wrap.

As you can rebalance at anytime, I see no reason to be in bonds unless you are close to retiring.

[zeroshiki]

Other than the fact that you're overloading on Developed countries (the next big thing might come out of developing countries/China) the Tawara No Load funds are actually pretty good because they have a LONG history (much longer than eMaxis or Rakuten or SBI) so if you're at all concerned about stability, you know they're good for it.