Help for 40yr old Brit, long term looking for advice

[RetireJapan]

I'm planning an article about this, and am leaning in favour of tsumitate going forward (although I still use regular myself). That's if I ever get free of my to-do list, of course...

[sutebayashi]

I should have raised the matter elsewhere, sorry to high-jack this post with all the NISA debate
But thanks for the responses, I have been lazy myself and not really following the changes too deeply, but I see that I probably should.

[Chibalass]

Retire Japan wrote:

-pay into UK pension if you can on a voluntary basis
-use iDeCo and NISA to invest
-invest every month into something sensible
-automate everything so you don't have to think about it
-enjoy your life and slowly get rich without noticing

Thanks for the summary. First two are done and pension planning etc is fine, I'm thinking about making the next ones more automatic investment payments. What are some suggestions on making the next step to more automatic payments?

Currently I have automatic deductions per month going to
eMAXIS Slim 全世界株式(オール・カントリー)

and
eMAXIS Slim 先進国債券インデックス

These are outside NISA and iDECO as those are already allocated. Both are with Rakuten but we also have SBI.
Thanks in advance for any suggestions.

[RetireJapan]

Thanks for the summary. First two are done and pension planning etc is fine, I'm thinking about making the next ones more automatic investment payments. What are some suggestions on making the next step to more automatic payments?

Currently I have automatic deductions per month going to
eMAXIS Slim 全世界株式(オール・カントリー)

and
eMAXIS Slim 先進国債券インデックス

These are outside NISA and iDECO as those are already allocated. Both are with Rakuten but we also have SBI.
Thanks in advance for any suggestions.

Depends what you want, really. You could put more into those excellent mutual funds.

Personally I am trying to build up some dividend income alongside my main index investing. I know it is probably less tax-efficient and may result in less money over the long-term, but I just like getting dividends

You could also up your emergency fund, pay down the mortgage (if you have one), or look into REITs or P2P lending (called 'social lending' here in Japan.

How much you save/invest and for how long is probably more important than what you do with it (within reason) so just upping the amount you invest is probably good enough...

Anyone else?

[Kanto]

Thanks for the summary. First two are done and pension planning etc is fine, I'm thinking about making the next ones more automatic investment payments. What are some suggestions on making the next step to more automatic payments?

Currently I have automatic deductions per month going to
eMAXIS Slim 全世界株式(オール・カントリー)

and
eMAXIS Slim 先進国債券インデックス

These are outside NISA and iDECO as those are already allocated. Both are with Rakuten but we also have SBI.
Thanks in advance for any suggestions.

Depends what you want, really. You could put more into those excellent mutual funds.

Personally I am trying to build up some dividend income alongside my main index investing. I know it is probably less tax-efficient and may result in less money over the long-term, but I just like getting dividends

You could also up your emergency fund, pay down the mortgage (if you have one), or look into REITs or P2P lending (called 'social lending' here in Japan.

How much you save/invest and for how long is probably more important than what you do with it (within reason) so just upping the amount you invest is probably good enough...

Anyone else?

Good choices!

eMAXIS Slim 全世界株式(オール・カントリー)
eMAXIS Slim 先進国債券インデックス

These funds are probably your best be for attempting to recreate a simple portfolio strategy.
See-> https://www.bogleheads.org/wiki/Two-fund_portfolio

What else? Well, you could consider splitting your bond allocation 50/50 with the following fund.

Rakuten Global Bond Index (Forex Hedge) Fund -> This is a hedged version of the Vanguard fund BNDW
楽天・全世界債券インデックス（為替ヘッジ）ファンド
https://www.rakuten-sec.co.jp/web/fund/ ... 90C000HBG4

This is a hedged fund and would offer more currency protection, though at a slighter higher cost.

....

Be cautious with P2P in Japan -> https://asia.nikkei.com/Business/Compan ... -penalties

....

REITs are not tax-efficient, and not very diversified. However, if you have insight into the industry you may feel differently.

....

Dividend investing is tax-inefficient. Its benefits are said to be more psychological than anything.

Do you know the only thing that gives me pleasure? It's to see my dividends coming in. John D. Rockefeller. Biography.

I would not recommend it personally.

....

Simple is not bad! Just keep investing in your taxable if you have exceeded your Nisa and iDeco contributions. The same funds are fine!

[fools_gold]

Be cautious with P2P in Japan -> https://asia.nikkei.com/Business/Compan ... -penalties

Definitely steer clear of P2P lending. It's extremely risky and the returns aren't worth it.

REITs are not tax-efficient, and not very diversified. However, if you have insight into the industry you may feel differently.

I'm not sure if that is correct. In Japan, REIT dividends are taxed the same as those from stocks. A mutual fund comprised of REITs is as tax efficient as a stock fund.

RIET funds might be not as diversified as stock funds, but the point is that they offer diversification out of stocks. You don't have to hold them, but a lot of people, Burton Malkiel included, recommend holding about 15%.

[Kanto]

Be cautious with P2P in Japan -> https://asia.nikkei.com/Business/Compan ... -penalties

Definitely steer clear of P2P lending. It's extremely risky and the returns aren't worth it.

REITs are not tax-efficient, and not very diversified. However, if you have insight into the industry you may feel differently.

I'm not sure if that is correct. In Japan, REIT dividends are taxed the same as those from stocks. A mutual fund comprised of REITs is as tax efficient as a stock fund.

RIET funds might be not as diversified as stock funds, but the point is that they offer diversification out of stocks. You don't have to hold them, but a lot of people, Burton Malkiel included, recommend holding about 15%.

It would depend on whether we are talking about J-REITs or American or foreign REITS.

https://ja.wikipedia.org/wiki/REIT

They do not seem tax-efficient to me. Are not all profits taxed as if they are dividends? Perhaps someone else can weigh in.

....

An ETF life Vanguard VTI is already 4% REIT. Most of us would have exposure in our Index holdings. I am not convinced they should be treated any different than a sector ETF.

[TokyoWart]

I'm not sure if that is correct. In Japan, REIT dividends are taxed the same as those from stocks. A mutual fund comprised of REITs is as tax efficient as a stock fund.

REIT's are less tax efficient than stocks even when their dividends get the same tax treatment because a REIT is mostly unable to reinvest in itself. When a company uses funds for investments that will grow future earnings instead of paying those funds as dividends to investors it is delaying the tax impact for its investors of its free cash flows. This is the same reason a no-dividend stock like Berkshire Hathaway is much more tax efficient for shareholders than a high dividend stock like AT&T. Because REIT's must passthrough 90%+ of their income to investors they are less tax efficient even in places like Japan where REIT dividends get the same tax treatment as stock dividends (even more so in the US where REIT dividends are taxed at a higher rate).

[fools_gold]

REIT's are less tax efficient than stocks even when their dividends get the same tax treatment because a REIT is mostly unable to reinvest in itself. When a company uses funds for investments that will grow future earnings instead of paying those funds as dividends to investors it is delaying the tax impact for its investors of its free cash flows. This is the same reason a no-dividend stock like Berkshire Hathaway is much more tax efficient for shareholders than a high dividend stock like AT&T. Because REIT's must passthrough 90%+ of their income to investors they are less tax efficient even in places like Japan where REIT dividends get the same tax treatment as stock dividends (even more so in the US where REIT dividends are taxed at a higher rate).

Just to clarify...I was talking about holding an REIT index fund, not individual REITs. Most index funds in Japan are structured so that distributions are kept within the fund and are therefore not taxed. Of course, holding individual REITs or a REIT ETF outside a NISA wouldn't be a good idea due to their relatively high dividends.

I think REITs aren't so popular at the moment because stocks are doing so well. I'm sure that if REITs were outperforming people would be looking for reasons to include them rather than the other way round.

[TokyoWart]

Just to clarify...I was talking about holding an REIT index fund, not individual REITs. Most index funds in Japan are structured so that distributions are kept within the fund and are therefore not taxed. Of course, holding individual REITs or a REIT ETF outside a NISA wouldn't be a good idea due to their relatively high dividends.

Thanks for the clarification. I agree that this gets around the tax inefficiency I was citing. That ability of Japanese funds to reinvest dividends without taxes is really a thing of beauty (and hence off-limits for American expats).