Newbie wanting to Invest
Posted: Fri Jan 08, 2021 11:11 am
Hey Everyone!
I'm a person who joined the forum recently and I have been going through the forums and also the website even before joining(for around 2 weeks now). Both the forums and site have been immensely helpful in understanding about personal finance and investment especially in terms of Japan and the options available to do so. Since most of the information available on internet is mostly directed towards US investors, this forum and the site has been really helpful, so thank you very much.
I have been working in Japan after I graduated(been almost 1.5 years now) and thought it's better to think and plan for later in terms of finances. So, for last 3-4 months I have been thinking, reading and researching about the different options I have to do so.
Let me describe my profile a bit so you can all understand my situation!
I am a non-American citizen in my early 20s(23 to be exact) and some of my future plans includes:
-- Getting my JLPT N1 (Dec.2020 gave N3, so fingers crossed, Currently on a 5 yr an Engineer/specialist Visa)
-- MBA degree in FT 1st to 20th ranked university.( Somewhere around age 25-27 starting depending on how promotions, etc. go for the work experience required, Aiming for the top universities but things/priorities might change after 5 years)
-- Starting my own business sometime in future to get out of working culture till you retire( planning to FIRE, RE not so sure but FI definitely )
Goals for long term are/will become overtime -
-- Having a family( quite long, somewhere 27-29, if all things go well)
-- Buying a house somewhere (I'm not a party animal so somewhere quite should be alright but also depends on the work situation then)
As for my current financial situation:
Income: Roughly 6M before taxes(excluding overtime pay)
Liabilities: None (parents are self sufficient and no outstanding loans as education loan)
Monthly Spending: 100-120K (Rent, groceries, eating out, utilities, gym, etc. Basically anything apart from travel)(I rent a 3DK with a fellow colleague who's of the same age, so split rent and utilities in half whatever the costs are)(I usually travel out of Tokyo once in 3-5 months and in my mind set aside 10k every month for it.)
Assets: Dec 2020 - went 60-40 with my dad on a commercial property in my country for about 11.5 million yen(my share was 40). Although the property is not market ready but this year sometime midyear we'll get the possession and the value doubles as soon as we get it(got an early deal so went through) We plan on renting it out but that income stream will be used by my dad, so I don't care/plan about it much. I used to send my earning back to tax-free account whenever the exchange rate was good. I have some more savings there which I plan to buy some gold with and make a Fixed deposit with rest of the savings (for emergency fund, about 6 months ~800k yen). I have some cash savings here in Japan also. Invested/Gambled ? in crypto in japan with 100k ( I know the thought of "you shouldn't put money in crypto if you don't assume that you'll lose it all", maybe over time go towards 300k in crypto but waiting for the correction to happen first, using DCA as strategy)
Risk Tolerance: Moderate~ish - High
I read, researched online and a lot of resources, discussions in this forum and have understood somethings regarding investing and ways to do so.
I have some questions regarding the things I have thought about.
Couple of things I have understood in terms of general investing -
1- Have an emergency fund (DONE)
2- Maximize the pension plan - I do pay the welfare premiums every month(I think I come under the being a company employee category of pension system, I don't know much details about the system but do know that my home country has the agreement with Japan, so in case I leave before, I do plan on paying the premiums for 10 years, if I'm right, to be eligible for pension)
I haven't checked the approximate pension I'll get but I'm not really considering it as a life-saver. Will try to check this later on nenkin-net
3- In time market goes up, don't try to time markets
4- Keep on investing small small sums
etc.
Now, immediate plans are to invest small sums in less volatile markets compared to crypto which points me to stocks, ETFs, mutual funds, etc.
I don't want to trade or make a portfolio for small term. I want to buy and hold for long as long as some need doesn't arrive.
I have 2 options as such - Make a trading account in my home country or make one account with Rakuten, SBI, Monex, etc here. I also know about the NISA account(the 1.2 million limit sits well with my limit of buying 100k worth stocks, etfs in a month, or more if it dips, so it's quite enticing)
Since I'm neither a US citizen nor Japanese citizen and as of now haven't decided where to settle(considering my home country still being a developing country),
I have certain questions regarding investing in the above stated options.
1. How are taxes handled? I’m aware of dividend taxation by US at 20.xx% for Japan. I’m bound to pay capital gains tax in Japan. My question is regarding will I be taxed 3 times(US, JP and my home country). My home country has DTAA with US and I think I read somewhere that Japan also has the same. Considering all the taxes and Fiat conversion fees, does it make sense to invest into other markets from Japan for long term? Since I haven’t decided settling here, in an event of leaving Japan, does using local brokers allow me to transfer my holdings to another broker overseas? Or do I have to liquidate everything and buy again from wherever I go. I know about NISA as tax free option in Japan. (Haven’t yet decided to settle anywhere, home? Japan? Somewhere else, entirely possible)
2. Buying any foreign stock or ETF whether it be through Japan or my home country has 2 conversion fees, taxes and broker commissions. These are evidently more in my home country. For eg.25% dividend taxing in my country. Considering all the fees, does it eventually payout in longer time to pay through all these?
3. I have also read the forum’s recommendation of e-maxis slim series. How does the returns fare in comparison of directly investing in US through Japan? Like investing into something like VTI with all the fiat conversions+commission versus just investing in e-maxis-slim.
4.Considering stocks and ETFs which pay dividend, is it better to re-invest the payout? I think if there’s no need then it’s better to be re-invested but willing to hear different views.
5.How diversification should be handled? Investing purely in US stocks/ US ETFs/Home stocks/Home stocks + mutual funds/mixture of both/diversifying over countries (JP, US and home)?
For long term(5-20 years), I’m willing to go US long but for short term(3-5 years), I’m also considering investing in Japan.
6.Since ETFs provide diversification easily, should I stick to ETFs or also go for individual stocks?
7.In long term, how do returns fare if I invest outside US or I invest in US? Assuming immediate long term being next 5-8 years in Japan. The options in my country are mutual funds and stocks. Mutual funds returns are 4-8% depending on which you choose. There are a handful of ETFs as they are not really popular in my country.
On another note, I have this thought for the last couple of weeks. As I share an apartment of 3DK with fellow colleague which costs us around 130k yen as rent in 23 wards. I was thinking that the rent we are paying is going into nothing apart from the fact that I can live in apartment. So if I were to buy a house of cost max 50 million yen, and if the mortgage payment is somewhere around 100-150k per month, then I can afford it now. Even if my roommate bails on me, I can still manage the mortgage payments. Does it makes sense to buy a house in Tokyo on loan given my age and goals as stated above? Last but not the least, My parents are advising me to invest conservatively in to FDs or to save and buy some land/home in my country in order to pay for my higher studies which I understand. But considering inflation going up, I think the interest accumulated will be eaten by inflation(at least most of it, 5-6% inflation). I on the other hand think it’s good to invest into market if you make good bets. Am I thinking wrong about this?
While I was writing the post, the site timed out so I lost maybe some part, but these were the questions in essence. In case any more info is needed for answering, let me know.
Thank you in advance!
I'm a person who joined the forum recently and I have been going through the forums and also the website even before joining(for around 2 weeks now). Both the forums and site have been immensely helpful in understanding about personal finance and investment especially in terms of Japan and the options available to do so. Since most of the information available on internet is mostly directed towards US investors, this forum and the site has been really helpful, so thank you very much.
I have been working in Japan after I graduated(been almost 1.5 years now) and thought it's better to think and plan for later in terms of finances. So, for last 3-4 months I have been thinking, reading and researching about the different options I have to do so.
Let me describe my profile a bit so you can all understand my situation!
I am a non-American citizen in my early 20s(23 to be exact) and some of my future plans includes:
-- Getting my JLPT N1 (Dec.2020 gave N3, so fingers crossed, Currently on a 5 yr an Engineer/specialist Visa)
-- MBA degree in FT 1st to 20th ranked university.( Somewhere around age 25-27 starting depending on how promotions, etc. go for the work experience required, Aiming for the top universities but things/priorities might change after 5 years)
-- Starting my own business sometime in future to get out of working culture till you retire( planning to FIRE, RE not so sure but FI definitely )
Goals for long term are/will become overtime -
-- Having a family( quite long, somewhere 27-29, if all things go well)
-- Buying a house somewhere (I'm not a party animal so somewhere quite should be alright but also depends on the work situation then)
As for my current financial situation:
Income: Roughly 6M before taxes(excluding overtime pay)
Liabilities: None (parents are self sufficient and no outstanding loans as education loan)
Monthly Spending: 100-120K (Rent, groceries, eating out, utilities, gym, etc. Basically anything apart from travel)(I rent a 3DK with a fellow colleague who's of the same age, so split rent and utilities in half whatever the costs are)(I usually travel out of Tokyo once in 3-5 months and in my mind set aside 10k every month for it.)
Assets: Dec 2020 - went 60-40 with my dad on a commercial property in my country for about 11.5 million yen(my share was 40). Although the property is not market ready but this year sometime midyear we'll get the possession and the value doubles as soon as we get it(got an early deal so went through) We plan on renting it out but that income stream will be used by my dad, so I don't care/plan about it much. I used to send my earning back to tax-free account whenever the exchange rate was good. I have some more savings there which I plan to buy some gold with and make a Fixed deposit with rest of the savings (for emergency fund, about 6 months ~800k yen). I have some cash savings here in Japan also. Invested/Gambled ? in crypto in japan with 100k ( I know the thought of "you shouldn't put money in crypto if you don't assume that you'll lose it all", maybe over time go towards 300k in crypto but waiting for the correction to happen first, using DCA as strategy)
Risk Tolerance: Moderate~ish - High
I read, researched online and a lot of resources, discussions in this forum and have understood somethings regarding investing and ways to do so.
I have some questions regarding the things I have thought about.
Couple of things I have understood in terms of general investing -
1- Have an emergency fund (DONE)
2- Maximize the pension plan - I do pay the welfare premiums every month(I think I come under the being a company employee category of pension system, I don't know much details about the system but do know that my home country has the agreement with Japan, so in case I leave before, I do plan on paying the premiums for 10 years, if I'm right, to be eligible for pension)
I haven't checked the approximate pension I'll get but I'm not really considering it as a life-saver. Will try to check this later on nenkin-net
3- In time market goes up, don't try to time markets
4- Keep on investing small small sums
etc.
Now, immediate plans are to invest small sums in less volatile markets compared to crypto which points me to stocks, ETFs, mutual funds, etc.
I don't want to trade or make a portfolio for small term. I want to buy and hold for long as long as some need doesn't arrive.
I have 2 options as such - Make a trading account in my home country or make one account with Rakuten, SBI, Monex, etc here. I also know about the NISA account(the 1.2 million limit sits well with my limit of buying 100k worth stocks, etfs in a month, or more if it dips, so it's quite enticing)
Since I'm neither a US citizen nor Japanese citizen and as of now haven't decided where to settle(considering my home country still being a developing country),
I have certain questions regarding investing in the above stated options.
1. How are taxes handled? I’m aware of dividend taxation by US at 20.xx% for Japan. I’m bound to pay capital gains tax in Japan. My question is regarding will I be taxed 3 times(US, JP and my home country). My home country has DTAA with US and I think I read somewhere that Japan also has the same. Considering all the taxes and Fiat conversion fees, does it make sense to invest into other markets from Japan for long term? Since I haven’t decided settling here, in an event of leaving Japan, does using local brokers allow me to transfer my holdings to another broker overseas? Or do I have to liquidate everything and buy again from wherever I go. I know about NISA as tax free option in Japan. (Haven’t yet decided to settle anywhere, home? Japan? Somewhere else, entirely possible)
2. Buying any foreign stock or ETF whether it be through Japan or my home country has 2 conversion fees, taxes and broker commissions. These are evidently more in my home country. For eg.25% dividend taxing in my country. Considering all the fees, does it eventually payout in longer time to pay through all these?
3. I have also read the forum’s recommendation of e-maxis slim series. How does the returns fare in comparison of directly investing in US through Japan? Like investing into something like VTI with all the fiat conversions+commission versus just investing in e-maxis-slim.
4.Considering stocks and ETFs which pay dividend, is it better to re-invest the payout? I think if there’s no need then it’s better to be re-invested but willing to hear different views.
5.How diversification should be handled? Investing purely in US stocks/ US ETFs/Home stocks/Home stocks + mutual funds/mixture of both/diversifying over countries (JP, US and home)?
For long term(5-20 years), I’m willing to go US long but for short term(3-5 years), I’m also considering investing in Japan.
6.Since ETFs provide diversification easily, should I stick to ETFs or also go for individual stocks?
7.In long term, how do returns fare if I invest outside US or I invest in US? Assuming immediate long term being next 5-8 years in Japan. The options in my country are mutual funds and stocks. Mutual funds returns are 4-8% depending on which you choose. There are a handful of ETFs as they are not really popular in my country.
On another note, I have this thought for the last couple of weeks. As I share an apartment of 3DK with fellow colleague which costs us around 130k yen as rent in 23 wards. I was thinking that the rent we are paying is going into nothing apart from the fact that I can live in apartment. So if I were to buy a house of cost max 50 million yen, and if the mortgage payment is somewhere around 100-150k per month, then I can afford it now. Even if my roommate bails on me, I can still manage the mortgage payments. Does it makes sense to buy a house in Tokyo on loan given my age and goals as stated above? Last but not the least, My parents are advising me to invest conservatively in to FDs or to save and buy some land/home in my country in order to pay for my higher studies which I understand. But considering inflation going up, I think the interest accumulated will be eaten by inflation(at least most of it, 5-6% inflation). I on the other hand think it’s good to invest into market if you make good bets. Am I thinking wrong about this?
While I was writing the post, the site timed out so I lost maybe some part, but these were the questions in essence. In case any more info is needed for answering, let me know.
Thank you in advance!