Regular Nisa or つみたてNISA -> What is the right choice?

[Kanto]

My wife and I are looking at setting up NISA accounts. We are trying to decide between Regular Nisa or つみたてNISA

We have just fully funded our IDeco accounts. We currently have existing funds that we want to invest.


We are fairly new to investing, so we will probably stick to a Stock/Bond split with Index funds. We are interested in eMAXIS Slim products. I am with Rakuten, and my wife is with Mizuho.

Is there any advantage to a regular Nisa account over a つみたて account considering our investment strategy?

[RetireJapan]

I am wary of trying to find the right or best option, in this case either would be much better than doing nothing

Basically tsumitate NISA only allows you to invest in mutual funds. Regular NISA allows you to buy stocks, etc.
Tsumitate NISA is tax-free for 20 years, regular only for five.
Tsumitate NISA is capped at 400,000 yen a year, regular NISA 1.2 million.
Tsumitate NISA is set and forget (you set up regular purchases), regular NISA you have to buy things yourself.

For normal people tsumitate NISA might be a slightly better choice, but either is perfectly fine.

[Jansen]

I'm going to disagree with Ben here. I think that Regular Nisa is the right choice because you get to invest a larger amount and in a wider range of options thus providing a potentially larger return. Even if all you do is fill it with eMaxis slim funds, it's still a better choice.

You could always switch to tsumitate Nisa at a later date if you find yourself not filling the entire 1.2m allocation.

[adamu]

Regular Nisa is the right choice because you get to invest a larger amount

This is not the case.

Regular NISA gives you 5 years x 1.2 million yen for a total of 6 million yen invested tax free.
Tsumitate NISA gives you 20 years x 400k yen for a total of 8 million yen invested tax free.

So the Tsumitate allows the larger investment.

However, the regular NISA allows you to invest more up-front, so probably pays off in terms of compounding if you keep rolling over the initial investments. But then again, it's only tax free for 5 years, whereas the Tsumitate is 20 years, so maybe Tsumitate wins on the compounding front too? I also strongly suspect the regular NISA may be phased out in the future.

The part about more investment options in a regular NISA is true.

I think it's a nuanced decision that people have to make for themselves.

If you have 1.2M/year to spare, and want to get as much invested as quickly as possible, or want to invest in individual stocks and ETFs go for regular NISA.
If you want to maximise the amount invested in the long run, are happy to be slow and steady (or don't have 1.2M to invest), and to stick to mutual funds, go with Tsumitate.

[creed]

The thing that keeps me away from Tsumitate NIsa is you're locked into it. If felt confident that I was going to get a regular salary and be able to contribute at every option for the next 20 years it looks appealing.

But I'm freelance so its money-on-money-off flow. I worry that when the lean times come that paying into Tsumitate nisa will be an option, and wonder if im even allowed to stop contributing for a short time.

So Nisa works best for me. Then setup a regular drip feed account to purchase weekly into funds on a normal trading account.

[Dabitto]

Tsumitate NISA gives you 20 years x 400k yen for a total of 8 million yen invested tax free.

I was under the same impression as you adamu. However, I read a Japanese blog today that pleasantly surprised me.
https://siegeljiro.com/tsumitatenisa-1000

I was under the impression that the 5 year extension (which was announced last year) only applied to the people who started making contributions in Tsumitate NISA from 2019 (one year after Tsumitate NISA got launched) onward, so that they could still make full use of this tax free invested 8 million yen cap.
However, it seems I was wrong. They simply extended the time you can contribute in Tsumitate NISA by a maximum of 5 years till 2042 (previously 2038), no matter what year you started contributing! The 20 year tax free compounding stays the same though.

Based on this, your calculation would be as follows:

Tsumitate NISA gives you (2042 - starting year) x 400k yen for a total of 10 million yen invested tax free (*when started in 2018).

Since I started contributing in Tsumitate NISA from 2019, I can invest 9.6 million tax free. This extra tax free 1.6 million yen I can invest, is a very pleasant surprise for me.

[RetireJapan]

Since I started contributing in Tsumitate NISA from 2019, I can invest 9.6 million tax free. This extra tax free 1.6 million yen I can invest, is a very pleasant surprise for me.

I think you have to take the timespan into consideration too, as well as whether you think tsumitate NISA will be extended further, along with the opportunity to roll over expiring years (this option in ordinary NISA can be extremely beneficial).

[Viralriver]

This is exactly the question I have. I'm confused with what to do since I like the idea of investing 100k per month on the 5 year plan, and being able to choose which companies I invest in, but the lower cap over the duration is offputting.

Am I able to invest in companies that trade on foreign stock markets like S&P etc? I am interested in investing in AMZN and other tech stock.

[Kanto]

This is exactly the question I have. I'm confused with what to do since I like the idea of investing 100k per month on the 5 year plan, and being able to choose which companies I invest in, but the lower cap over the duration is offputting.

Am I able to invest in companies that trade on foreign stock markets like S&P etc? I am interested in investing in AMZN and other tech stock.

The つみたて offerings depend on your provider. A good broker will have 100+. a bank will only have a handful. However, they are mostly mutual funds and balanced funds. They do indeed have low-cost S&P500 funds.

If you want to own individual stock you would need to go with the regular Nisa.

For 99% of people, the best option is usually Tsumitate (1) Select a low-cost index fund, (2) Set auto-withdraw, and move on.

Finally, the Regular Nisa will end at the end of this decade, and it seems we will only have the Tsumitate option.

[LukeTek]

I am not sure about the "rolling over" part for a standard VISA: form this article I can read that:

One thing to keep in mind is that the tax-free benefits only last for five years (or twenty years in the case of tsumitate NISA), or 10 if you roll them into a new NISA account after the first period is up

what does that mean? After the first NISA expires I could take all what's in there and start a new 5-years NISA?