RetireJapan

I'm looking to invest in ETFs with the specific objective of creating dividend income, both for the short-term and post-retirement (10 years from now).

I've been buying dividend-paying stocks via NISA, but have no experience investing in ETFs.
Based on a search through Rakuten, it seems my best options are high-dividend stock ETFs, REITs and bond ETFs like the ones below.

Am I missing anything? Any pitfalls/issues with the ETFs below, or recommendations for others that might be a better match for my needs?

I am a long-term foreign resident in Japan, non-US nationality.

High-Dividend
1478
https://www.rakuten-sec.co.jp/web/marke ... ric=1478.T
1489
https://www.rakuten-sec.co.jp/web/marke ... ric=1489.T

REITs
1345
https://www.rakuten-sec.co.jp/web/marke ... ric=1345.T
1495
https://www.rakuten-sec.co.jp/web/marke ... ric=1495.T
1660
https://www.rakuten-sec.co.jp/web/marke ... ric=1660.T

Bonds
1566
https://www.rakuten-sec.co.jp/web/marke ... ric=1566.T

dogezenji wrote: ↑Mon Dec 13, 2021 4:59 am
Am I missing anything? Any pitfalls/issues with the ETFs below, or recommendations for others that might be a better match for my needs?

1. May I ask why you would put dividend-paying stocks in a NISA?

The Nav shrinks as the dividend is paid out, thus reducing your tax-sheltered amount. It is best to stick with accumulating, non-dividend paying funds.

2. Why stick only with TYO-listed dividend payers? Japan is 7% of the world market, so you are limiting yourself to what, 3-4% of global stocks by choosing only Japanese dividend payers?

3. High fees. Did you check some of those REIT funds?

4. Poor tax efficiency. Monthly distributions are incredibly tax-inefficient.

5.Risk-on-risk, emerging market bonds are a very risky play long term.

......

Finally, I would suggest watching this video if you are sure about your plan, regardless.

https://youtu.be/f5j9v9dfinQ

......

Thank you - I greatly appreciate and value your advice, especially seeing that your screen name suggests a contrarian approach to investing to mine.

1. I only own dividend-paying stocks and didn't know any better. Thank you for pointing this out.

2. Mostly to not have to worry about currency risk, but I understand your point. I will take a look at US and global high-dividend ETFs.

3. Unless I'm missing something 0.19% to 0.3% which I find still acceptable.

4. I understand your point; but wouldn't this be similar or worse (considering workload and possibility of a multi-year slump) if I sell off parts of my portfolio each month/year to generate income?

5. Thank you. I will give this one a pass.

As mentioned under 4., I am not looking for capital appreciation but income - similar to the below post that was featured on the Retire Japan blog last week.

https://awealthofcommonsense.com/2021/1 ... dividends/

I don't buy ETFs any more, but my wife has some 1478. One thing to bear in mind is that ETFs aren't that popular in Japan. Some of them have low volume and very large bid-ask spreads. I'd avoid these because it's difficult to fill a buy or sell order at your preferred price and there is also a chance of unpopular ETFs being delisted. You definitely don't want that happening if you're holding them in a NISA.

dogezenji wrote: ↑Tue Dec 14, 2021 12:03 am Thank you - I greatly appreciate and value your advice, especially seeing that your screen name suggests a contrarian approach to investing to mine.

1. I only own dividend-paying stocks and didn't know any better. Thank you for pointing this out.

2. Mostly to not have to worry about currency risk, but I understand your point. I will take a look at US and global high-dividend ETFs.

3. Unless I'm missing something 0.19% to 0.3% which I find still acceptable.

4. I understand your point; but wouldn't this be similar or worse (considering workload and possibility of a multi-year slump) if I sell off parts of my portfolio each month/year to generate income?

5. Thank you. I will give this one a pass.

As mentioned under 4., I am not looking for capital appreciation but income - similar to the below post that was featured on the Retire Japan blog last week.

https://awealthofcommonsense.com/2021/1 ... dividends/

Sorry if I was too contrarian.

If you understand Ben*s arguments, but still want to go ahead I completely understand.

1. The Nisa is a bucket you want to be as full as possible, and to grow as much as possible. You do not want profits leaking out. You cannot shovel them back in.

2. I would think concentration risk is more important than currency risk when it comes to dividend investing. As dividend funds are less than half the market you are already limiting your diversification.

Picking dividend players is no different than stock picking. I would recommend Diversified ETFs over single stocks any day.

3. Perhaps it was only one of the REIT funds. 1495 - 信託報酬 - 0.709. The first one I looked at.

4. Hard to say. It depends on your income. I would not suggest income investing period personally. The focus for most retirees should be on accumulation not spending. And if you do intend to reinvest dividends, and accumulating ETF is far more sensible.

5. Do not expect bonds to pay much, period, without a lot of risk in the current market.

As a final note SBI and Rakuten allow you to automatically sell a % of an investment trust every month or year to create income. This is another solution.

The simplest investment would be 100% in a global equities fund and set a percentage to be sold monthly upon retirement to generate income.

Finally, all else being equal check out vanguard dividend etfs -> https://etfdb.com/themes/vanguard-dividend-etfs/

fools_gold wrote: ↑Tue Dec 14, 2021 3:20 am I don't buy ETFs any more, but my wife has some 1478. One thing to bear in mind is that ETFs aren't that popular in Japan. Some of them have low volume and very large bid-ask spreads. I'd avoid these because it's difficult to fill a buy or sell order at your preferred price and there is also a chance of unpopular ETFs being delisted. You definitely don't want that happening if you're holding them in a NISA.

Thank you - this is a good point to keep in mind.

Thank you again - you were not too contrarian at all and your advice has been incredibly helpful steering me away from less-than-ideal purchses.

It was also a good reminder to go through my portfolio of individual stocks and get rid of under-performers.

Not sure if I'll be able to completely ignore dividend-paying funds going forward, but I'll definitely be able to strike a better balance. Thanks again!