Investing in Vanguard Total Stock Market ETF through Rakuten Securities

[kiwi]

Hello all,

I've been reading a bit on this forum about buying Vanguard funds, and the need to convert into foreign currency and pay foreign taxes etc.

I'm not US citizen. I'd like to confirm if I Invested in the Vanguard Total (US) Stock Market ETF through Rakuten Securities, I'd be investing in Japanese yen because I'm buying the fund through Rakuten Securities, and not Vanguard directly - is that right?

This is the fund: https://www.rakuten-sec.co.jp/web/fund/ ... r401k=true

Also, as a side question, I've been reading a bit on investing in ETFs through Jim Collins who writes the stock series. He suggests fully investing in the fund above, and wouldn't bother investing in international stocks because a lot of US companies are international anyway. What's your opinion on this method of 100% US-based investing?

[adamu]

That is a Japanese mutual fund that itself buys the Vanguard ETF. So yes, you're right. You buy it in yen, and you pay Rakuten a fee for the privilege that will eat away at your returns over time.

You can also buy VTI directly through Rakuten, but you will need to convert to USD and there are transaction fees involved when you exchange currency (Rakuten particularly has poor exchange rates) and also when buy and sell the ETF. ETFs are also not eligible for Tsumitate NISA / iDeCo.

While the stock series is a great resource, it's aimed at US residents. As an international investor, you might want to consider investing in a global fund instead. However, buying US-listed global funds (such as VT) is problematic because dividends on the non-US part are subject to taxation by 3 countries (origin, US, Japan). So in that case a Japanese fund such as eMaxis Slim All Country, which buys the stocks itself, is preferable to Rakuten's offering which buys VT and is subject to tripple taxation + adds its own fees on top.

If you wanted to stick with the US, eMaxis Slim has an S&P 500 fund, which is also cheaper than Rakuten's VTI wrapper, but they don't have an exact equivalent of VTI (it's equivalent to VOO).

I used to buy VT directly, but now I buy eMaxis Slim All Country.

[Kanto]

That is a Japanese mutual fund that itself buys the Vanguard ETF. So yes, you're right. You buy it in yen, and you pay Rakuten a fee for the privilege that will eat away at your returns over time.

You can also buy VTI directly through Rakuten, but you will need to convert to USD and there are transaction fees involved when you exchange currency (Rakuten particularly has poor exchange rates) and also when buy and sell the ETF. ETFs are also not eligible for Tsumitate NISA / iDeCo.

While the stock series is a great resource, it's aimed at US residents. As an international investor, you might want to consider investing in a global fund instead. However, buying US-listed global funds (such as VT) is problematic because dividends on the non-US part are subject to taxation by 3 countries (origin, US, Japan). So in that case a Japanese fund such as eMaxis Slim All Country, which buys the stocks itself, is preferable to Rakuten's offering which buys VT and is subject to tripple taxation + adds its own fees on top.

If you wanted to stick with the US, eMaxis Slim has an S&P 500 fund, which is also cheaper than Rakuten's VTI wrapper, but they don't have an exact equivalent of VTI (it's equivalent to VOO).

I used to buy VT directly, but now I buy eMaxis Slim All Country.

Well said, Similiar to Adamu I buy Emaxis Slim All Country in my NISA and Taxable, and *Rakuten wrapped VT in my iDeco as it is the only decent option with Rakuten.

Quick note, there is an ETF version of the S&P fund that is free to trade.

https://www.rakuten-sec.co.jp/web/marke ... ric=2558.T

[adamu]

VT in my iDeco as it is the only decent option with Rakuten.

Considering the post was about the subtleties of US ETFs vs funds, you shouldn't confuse VT with 楽天・全世界株式インデックス・ファンド. I think you were talking about the latter, because you can't buy VT in an iDeCo.

[Kanto]

VT in my iDeco as it is the only decent option with Rakuten.

Considering the post was about the subtleties of US ETFs vs funds, you shouldn't confuse VT with 楽天・全世界株式インデックス・ファンド. I think you were talking about the latter, because you can't buy VT in an iDeCo.

I meant Rakuten wrapped VT, excuse the misguided abbreviation.

[Bushiman]

That is a Japanese mutual fund that itself buys the Vanguard ETF. So yes, you're right. You buy it in yen, and you pay Rakuten a fee for the privilege that will eat away at your returns over time.

Please correct me if I've missed something, but isn't the difference between the 'real cost' of owning the Rakuten Global Equity wrapped Vanguard ETF and the eMaxis Slim All-Country 0.06%...?
Is that a big enough number to warrant worrying about fees eating away at returns?

[adamu]

That is a Japanese mutual fund that itself buys the Vanguard ETF. So yes, you're right. You buy it in yen, and you pay Rakuten a fee for the privilege that will eat away at your returns over time.

Please correct me if I've missed something, but isn't the difference between the 'real cost' of owning the Rakuten Global Equity wrapped Vanguard ETF and the eMaxis Slim All-Country 0.06%...?
Is that a big enough number to warrant worrying about fees eating away at returns?

Right, but the question was about buying a Japanese fund that wraps a US ETF. I was pointing out that there are costs to that - it doesn't come for free.

The Rakuten Global fund has a management fee of 0.2120% and a real cost of 0.261%,
Compared to if you buy VT directly, which has a management fee of 0.08%.

So more than two thirds of the fees go to Rakuten.

It also has a disadvantage compared to Japanese global funds, because the dividends on all the non-US shares are taxed by the US, in addition to to the origin country and Japan.

Here's the shintaro page for the Rakuten fund fund where they discuss the same points: https://shintaro-money.com/rakuten-vanguard-vt/

You're right that eMaxis slim doesn't differ much on costs. But it has the advantage that it's not subject to triple taxation. I also much prefer it because it is an actual fund that owns the underlying assets, rather than charging high fees for just reselling Vanguard's fund.

Neither Rakuten nor eMaxis Slim compare to buying Vanguard ETFs directly though. But that comes with its own problems: currency exchange fees, trading fees, (triple for international funds) taxable dividend payouts, ineligibility for Tsumitate NISA / iDeCo...

[Bushiman]

That is a Japanese mutual fund that itself buys the Vanguard ETF. So yes, you're right. You buy it in yen, and you pay Rakuten a fee for the privilege that will eat away at your returns over time.

Please correct me if I've missed something, but isn't the difference between the 'real cost' of owning the Rakuten Global Equity wrapped Vanguard ETF and the eMaxis Slim All-Country 0.06%...?
Is that a big enough number to warrant worrying about fees eating away at returns?

Right, but the question was about buying a Japanese fund that wraps a US ETF. I was pointing out that there are costs to that - it doesn't come for free.

The Rakuten Global fund has a management fee of 0.2120% and a real cost of 0.261%,
Compared to if you buy VT directly, which has a management fee of 0.08%.

So more than two thirds of the fees go to Rakuten.

It also has a disadvantage compared to Japanese global funds, because the dividends on all the non-US shares are taxed by the US, in addition to to the origin country and Japan.

Here's the shintaro page for the Rakuten fund fund where they discuss the same points: https://shintaro-money.com/rakuten-vanguard-vt/

You're right that eMaxis slim doesn't differ much on costs. But it has the advantage that it's not subject to triple taxation. I also much prefer it because it is an actual fund that owns the underlying assets, rather than charging high fees for just reselling Vanguard's fund.

Awesome! Thanks for the reply adamu...
I thought I must've missed something... So the taxation is not factored into the 'real cost' -understood. Thanks!

[adamu]

Ah, you quoted me before I could make an edit. Added a final sentence about buying ETFs directly!