Investing in "bonds" on tsumitate NISA

[Kanto]

Excellent! Thanks for the correction

So the situation is even better than I thought.

Losing money through broker bankruptcy and mismanagement seems extremely unlikely though.

About as unlikely as MUFJ or Postbank folding.

I am not too worried.

I think this kind of thing is more important for (1) small regional bank (2) smaller brokers and "app" based brokers.

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It seems prudent to spread things out somewhat though. Not necessarily at the 1000万 mark.

[RetireJapan]

Yeah, I have four investment accounts, and my wife has two.

[Viralriver]

Hmm, this is a little worrying though - since the point of an investment account is to (hopefully) make money for retirement, I'm hoping to have much more than 10m JPY invested by the time I retire. If each account is only insured up to 10m, once our investments are making considerable enough gain to exceed that amount, and you already have 2-3 accounts setup with different securities firms... what do you do? Just hope that your money is safe?

[Kanto]

Hmm, this is a little worrying though - since the point of an investment account is to (hopefully) make money for retirement, I'm hoping to have much more than 10m JPY invested by the time I retire. If each account is only insured up to 10m, once our investments are making considerable enough gain to exceed that amount, and you already have 2-3 accounts setup with different securities firms... what do you do? Just hope that your money is safe?

Sorry, perhaps you are reading too much into this.

It is EXTREMELY unlikely that a large major bank or Securities company will fail. For example, Postbank and MUFJ have some of the largest deposit amounts in the entire world.

It is EXTREMELY unlikely huge established and diversified brokers like Rakuten and SBI would fail.

This is a worst-case scenario, war, plague or disater.

Not putting all your eggs in one basket is general prudent advice though. Investment accounts are free to open.

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Have banks failed in Japan? Yes, small regional ones in Japan do fail from time to time. (You are only guaranteed 1000万）

Have securities firms failed in Japan? Yes, smaller ones have failed. (You are only guaranteed 1000万）

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[captainspoke]

Have banks failed in Japan? Yes, small regional ones in Japan do fail from time to time. (You are only guaranteed 1000万）

Have securities firms failed in Japan? Yes, smaller ones have failed. (You are only guaranteed 1000万）

So some smaller regional banks have failed, as have some smaller brokerage firms...

Finding info about what actually happened to customers of those failed businesses should be possible.

Did the folks with over ¥10M in those banks/brokerages lose everything over that, or were they made right?

[Kanto]

Have banks failed in Japan? Yes, small regional ones in Japan do fail from time to time. (You are only guaranteed 1000万）

Have securities firms failed in Japan? Yes, smaller ones have failed. (You are only guaranteed 1000万）

So some smaller regional banks have failed, as have some smaller brokerage firms...

Finding info about what actually happened to customers of those failed businesses should be possible.

Did the folks with over ¥10M in those banks/brokerages lose everything over that, or were they made right?

My Japanese research skills are not up to the task.

Businesses are usually the most affected by these types of failures.

https://www.dic.go.jp/english/e_katsudo ... 00268.html

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This is not unique to Japan. For instance, in Canada, the CDIC insure only up to $100,000. In the UK the FSCS insures £85,000 per account.

Considering accounts are free here, it seems prudent to spread out your investments.

[Tony]

Going back to the original question, I'm following the boglehead strategy that bonds act as ballast to your investment portfolio, they are not a vehicle for increasing returns, as such, I have no problem buying 10-year floating 個人向け国債 despite the low interest rates on them, as they're very low risk. I feel like any bond fund that has high returns is going to be one that has a much higher risk, which is the opposite of what I want from bonds.

[Kanto]

Going back to the original question, I'm following the boglehead strategy that bonds act as ballast to your investment portfolio, they are not a vehicle for increasing returns, as such, I have no problem buying 10-year floating 個人向け国債 despite the low interest rates on them, as they're very low risk. I feel like any bond fund that has high returns is going to be one that has a much higher risk, which is the opposite of what I want from bonds.

There are bond funds, and there are bond funds.

Something like ｅＭＡＸＩＳ Ｓｌｉｍ 先進国債券インデックス would be more of a diversifier.

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I have no problem buying 10-year floating 個人向け国債

The Boglehead approach does not recommend floating bond rates FYI.

[sutebayashi]

As for those guarantees around 10 million yen - I think it's a non-issue unless you deposit more than 10 million yen with your investment firm and then they immediately go bust that day, or something like this.

They have to segregate client assets from their own in a trust bank, so even if they go down, their client assets will be protected in the trust bank and should be unaffected in that respect.

The investment firms will also be audited to check that they are properly segregating client assets in this way.

So you'd be pretty unlucky if you were to somehow lose money in this way, here in Japan, I believe. The regulations have clients pretty well protected.

[RetireJapan]

Personally I am pretty paranoid, but I think the chance of losing money due to broker malfeasance/bankruptcy is extremely low.

The risk I would be looking to avoid by having multiple accounts is having an account hacked or frozen, or having my investments stolen somehow. Still fairly low probability (especially as transactions take several days, and money can only be withdrawn from the broker into your designated bank account).