ChapInTokyo wrote: ↑Wed May 22, 2024 1:35 am
ToushiTime wrote: ↑Tue May 21, 2024 11:59 pm
ChapInTokyo wrote: ↑Tue May 21, 2024 11:41 am
This would just be for the NISA part.
I'm thinking of NISA as the last account that'll be cashed out, after all the money in my taxable account has been drawn down. Since this will be when I'm probably quite decrepit, I am thinking that something which doesn't need any looking after but will keep chugging along on auto pilot until the bitter end will be appropriate.
Your idea of the JGBi fund is also good. In the long term, who knows what'll come to pass?
Incidentally my original idea of the
Rakuten Index Balance fund (70 VTI + 30 hedged BNDW) might not be so tax inefficient after all. According to Vanguard, the foreign tax paid by
VXUS last year was 6.80% of its dividends and the foreign tax paid by
BNDX (the international half of
BNDW) last year was 0.26% of its dividends. Since VXUS comprises about half of
VT, and the other half is
VTI which is US total stock market, the triple taxation hit from taxes paid in the origin countries was actually less than
3.6% of its dividends, since the US half of BNDW (ie. BND) pays out dividends too and those dividends are not subject to 'foreign' withholding tax.
Now, when you consider that
VT has 84.2% of the components of
Small Cap ETF (VWO) and 85.8% of the components of
FTSE All-World ex-US Small-Cap ETF (VSS) which would both be quite expensive to cover via a Japanese mutual fund, the triple taxation penalty of
less than 3.6% of paid out dividends doesn't seem too prohibitive. That is, of course if you think small caps might outperform in the long run.
Foreign tax credit information for eligible Vanguard funds:
https://investor.vanguard.com/content/d ... s-2024.pdf
For me, going 50/50 Japan/others and 50/50 stocks/bonds doesn't seem diversified enough geographically or by asset class.
I guess it depends how much your NISA makes up of your overall portfolio.
Ah the 50/50 Japan/others and 50/50 stocks/bonds is the allocation of the Nissay fund that I mentioned as a potential option for lowering exposure to triple taxation (by overweighting Japanese assets), but the
Rakuten Index Balance fund (70 VTI + 30 hedged BNDW) is approx 6% Japan/94% R.O.W. and 70/30 stocks/bonds so that one is a more aggressive market cap weighted total world investment.
As for the triple taxation hit from taxes paid in the origins countries, that "less than 3.4% is the proportion of dividends, not of the amount invested and that figure will be even more diluted when you add the 50% US stocks by the
Total Stock Market (VTI) component of
VT, and the 50%
US Total Bond Market (BND) component of
BNDW so as for this Rakuten fund I feel that the triple taxation issue will disappear in the margin of error between the performance of ACWI (the index used by
eMAXIS Slim All Country) and FTSE Global All Cap (the index used by
Vanguard Total World Stock Index Fund (VT)). I've not actually run the numbers on this though.
I wonder whether anyone here (or the investment blogger Shintaro) has looked into the actual impact of triple taxation on a portfolio using US domiciled Global stocks/bonds balanced ETFs...
--
P.S. Thanks for the link to
Building a Bulletproof Retirement Portfolio, with Tyler from Portfolio Charts, May 15, 2024
https://podcasts.apple.com/jp/podcast/m ... 0655629930
The suggestion of 30% gold was a bit of a shock to me although I have considered adding a little bit of gold exposure to my portfolio as an inflation hedge. I do wonder though whether gold is better than JGBi funds for this, considering the volatility of gold prices. Perhaps the whole point of gold in the retirement portfolio is for diversification and long term inflation hedge and not risk reduction like with a JGBi?
Edit: I added various points after initially writing this yesterday.
Roger that re. the Nissay vs Rakuten Fund.
I think I was only half-awake when I wrote that comment about the 3.6%, sorry!
Unless, I am screwing up my calculations again, if you had a dividend yield of 2% that would be an extra cost of 0.07%, which gets further diluted as you said. The triple taxation issue comes up a lot on this forum, hence the wiki page I linked to. It is not nothing, but it is not that bad.
You asked about Shintaro Money and tax calculations:
https://shintaro-money.com/kaigai-etf-r ... _FOFVTSBIV
BTW, if this is your fund, the 楽天・インデックス・バランス・ファンド（株式重視型）, it has a 実質コスト (real cost on Shintaro) of 0.245%, which is a bit high, possibly due to the hedging cost? The unhedged eMaxis SLIM Developed Nations Bonds fund is 0.169% and the eMaxis All Country is 0.111%. So if you were to combine them in the same ratio as your fund 70:30, you would get an average weighted cost of 0.1284% which is half the cost of your fund, and that is before you consider the additional third country/triple tax. That's quite a lot to pay, just to get the hedging and automatic rebalancing service.
https://shintaro-money.com/rakuten-vang ... x-balance/
Unlike you, I don't want to pay to currency-hedge bonds, but I realize you are retired now.
Another issue is Japan accounts for about 10% of the bond fund, if it is based on this index
https://www.ssga.com/uk/en_gb/instituti ... st-sybz-gy
I don't think I would want that much weighting for a nation with the worst debt-to-GDP ratio in the world and little prospect of generating enough growth to pay the debt off or absorb a spike in interest costs.
Also, the eMaxis SLIM bond fund is limited to government bonds while the BNDW includes corporate bonds and mortgage backed securities which are more risky.
I had thought about switching from All Country for future NISA purchases to get the all-cap exposure, so I looked at these, which all track the FTSE Global All Cap.
Unfortunately, the Rakuten one was too expensive (0.217% on Shintaro) compared to All Country (0.111%).
The SBI wrap of VTI, SPDW and SPEM, which effectively tracks the FTSE Global All Cap, uses Resona, which nearly went under in 2003, as its trust bank, which puts me off a bit.
I would have gone for the SBI wrap of VT, but my NISA is with Rakuten which doesn't offer that.
Rakuten VT Wrap: 0.217% "real cost" on Shintaro (Trust Bank: Sumitomo Mitsui Trust Bank)
楽天・全世界株式インデックス・ファンド [楽天・VT(楽天インデックス・シリーズ)
https://www.rakuten-sec.co.jp/web/fund/ ... 90C000FHC4
SBI VTI + SPDW + SPEM Wrap: 0.112% "real cost" (Trust Bank: Resona Bank, almost went bankrupt in 2003...)
ＳＢＩ－ＳＢＩ・全世界株式インデックス・ファンド
https://site0.sbisec.co.jp/marble/fund/ ... =28931217C
SBI VT Wrap: 0.151% real cost (Trust Bank: MUFJ Trust Bank)
ＳＢＩ－ＳＢＩ・Ｖ・全世界株式インデックス・ファンド
https://site0.sbisec.co.jp/marble/fund/ ... =289311221
実質コスト vs 信託報酬 on Shintaro here
https://shintaro-money.com/index-cost/#i-3
Re. the podcast; yeah, the 30% gold was a surprise. The host questioned that. I think the main point was just gold is another thing that may diverge from stocks in certain inflationary and geopolitical scenarios so it just helps diversify risk by asset class.
This is the guest researcher's take on gold and inflation (from his website):
"I’ve highlighted in gray the timeframes where real rates were less than 1%. While there are a few notable exceptions (like the early 1970s where gold corrected after coming off the gold standard — more on that in a minute), the relationship between the gold price and real interest rates is fairly strong. When real rates are sufficiently positive, gold does poorly because investors prefer assets that pay interest. But when real rates are very low or negative, gold does well because investors prefer not to lose purchasing power on a “safe” investment.
So personally, I would argue that the inflation-hedging properties of gold are often misunderstood by both gold bugs and gold haters. The gold price is driven by a myriad of macroeconomic factors including real interest rates. Because real interest rates are affected by inflation, gold does indirectly protect against very sharp inflation that craters real rates. But it also can respond strongly even in times of low inflation as rates fall to particularly low levels like we’re experiencing today."
https://portfoliocharts.com/2020/08/21/ ... e-of-gold/