RetireJapan

Hello everyone. This is an investment question but I posted it here since it could cover stocks, real estate, and any other investments.

I was wondering if anyone has advice for my situation or where to find more information on this.

I am a US citizen, and have been working in Japan for a bit over a decade. All of my investments are in brokerages in the us—primarily index funds with a bit in cash and a bond fund. I hope to keep teaching at university for the next 20 years but am not yet tenured so that isn’t guaranteed. We are holding off on buying a house until we know where we want to make our long term home (also dependent on my work). Our hope is to do so in 4 or 5 years.

My wife is a Japanese citizen (no US green card) and is now listed as my dependent. However, she has a fair amount of savings now from working and an small inheritance and is trying to decide what to do with it.

We’re thinking of our diversification both in terms of asset types and as an international couple. Our goal is to build wealth and stability in the long term. We don’t have any plans to move away from Japan.

She will probably open a NISA and iDeco but beyond that is undecided. Our goal is for her investments to add stability to our portfolio to balance out the fact that it is heavily US weighted. I’ve found a lot of useful information here and elsewhere about investing in stocks in Japan, real estate, etc, but am trying to put it together in light of our situation. We are considering different kinds of investment (real estate, bonds, stocks, etc.) but nothing highly speculative.


I appreciate any comments and advice you all have to offer.

Thank you!

When you say 'dependent', I hope that means japan only.

I'm not an expert, but I've read that if you claim your spouse on US taxes (married filing jointly), that then means that they have to report things as you do--listing accounts on an FBAR and so on. The bigger worry is that their investments would then be included, and the danger of PFIC reporting would follow.

Thank you. That's something I'll have to check. as my wife has no US ID or Social Security number we've never filed jointly. I've always just filed my taxes individually. I will keep that in mind for the future though!

Biketokyo wrote: ↑Mon Mar 21, 2022 2:04 am Thank you. ...

And guessing from your user name, do you ride? If you haven't come across it yet, TCC is a really good site.

(this morning, I'm old and slow, and not on strava)

First of al, let’s address the elephant in the room: The war in Ukraine. If you don’t have money already committed in investments I would hold off on doing anything for a few months until we have surety that NATO will not get sucked into the conflict and that Russia will not start lobbing nuclear/chemical weapons. In which case, all bets are off (unless you’ve got a large stake in bullets and bandages). I already liquidated all of my non-retirement investments when Russia invaded Ukraine.

With that out of the way and assuming we get back to a stable investing environment:

I am in the exact same situation as you in regards to your spouse. IMO you would do well to maintain your single filing status in the US. That way any gains made by your spouse in Japan will be invisible to the IRS (if you win the Japanese lottery for example ). You ARE able to file jointly even if your spouse does not have a green card or Social Security number. Since we do not know your exact financial situation, however, it may be good idea to run the numbers both ways and see which benefits the most before filing (remember if you file overseas you get an extra month to file to IRS). But be warned, adding foreign income to your US or Japanese tax return will open a Pandora’s box of multinational filing status that you will probably wish you had kept shut.

Your goal of building wealth while maintaining stability is of course the holy grail of investing. Whether they can exist in tandem is the source of endless debate. You said that you have already done some investing in the US so you probably already know this but- anybody who tells you that they have a surefire plan is full of it.

So rather than getting advice from your local fortuneteller/investment broker, we can look at historical returns which is about the only concrete thing that exists in the investment world.

I think your concern that your portfolio is too heavily US weighted is misplaced. Especially since your main goals are to build wealth with stability. US investments are unparalleled on both fronts. Let’s take a look at the S&P 500 index as an example. You would be hard-pressed to beat a passive investment in the S&P 500 mutual fund as opposed to a actively managed globally diverse portfolio. Many people express consternation that they do not have any exposure to international investments but remember that many of the S&P 500 companies are multinationals and that approximately 30% of the revenue of the S&P 500 comes from foreign markets. So in addition to having an exposure to foreign markets you have the unsurpassed security of owning US based companies.

Taking the above into account the main wealth building fund your wife should Dollar cost average (or in this case yen cost average) into her Nisa/brokerage account is ｅＭＡＸＩＳ　Ｓｌｉｍ　米国株式（Ｓ＆Ｐ５００). It mimics the US return and still has a low management fee.

Now for your risk mitigation/diversification fund I have found that the bond fund ｅＭＡＸＩＳ　Ｓｌｉｍ　先進国債券インデックス works well.

IMO these are the only two funds you need two in your Nisa and/or regular brokerage account at the moment. Keeping it simple reduces the chances you will make disastrous investment timing mistakes. You can allocate more or less to each fund based on your risk adversity. With your 20 year time horizon I would suggest a 70/30 stock bond allocation moving to 50-50 when you get closer withdrawing.

As far as real estate goes, from my research I have found unless you have millions of dollars to play around with to buy centrally located investment properties- buying a house is not really an investment in Japan. It’s much like an automobile that loses value once you drive off the sales lot. But since my experience in Japanese real estate is purely academic, I will leave it at that. I’d be interested to know if anyone has had any more of a positive experience.

Make sure you maximize your government and employer pensions. If your employer does not offer a pension find another that does. A point lost on many young investors.

Also, not owning a car has saved me a ton of money. Car payments, insurance, maintenance and, as we have recently seen, ridiculous gasoline prices really add up (this may be another complication when buying a home if you have to move to the countryside).

Hope that helps.

Gulliver wrote: ↑Wed Mar 23, 2022 11:41 am I think your concern that your portfolio is too heavily US weighted is misplaced. Especially since your main goals are to build wealth with stability. US investments are unparalleled on both fronts. Let’s take a look at the S&P 500 index as an example. You would be hard-pressed to beat a passive investment in the S&P 500 mutual fund as opposed to a actively managed globally diverse portfolio. Many people express consternation that they do not have any exposure to international investments but remember that many of the S&P 500 companies are multinationals and that approximately 30% of the revenue of the S&P 500 comes from foreign markets. So in addition to having an exposure to foreign markets you have the unsurpassed security of owning US based companies.

Taking the above into account the main wealth building fund your wife should Dollar cost average (or in this case yen cost average) into her Nisa/brokerage account is ｅＭＡＸＩＳ　Ｓｌｉｍ　米国株式（Ｓ＆Ｐ５００). It mimics the US return and still has a low management fee.

Now for your risk mitigation/diversification fund I have found that the bond fund ｅＭＡＸＩＳ　Ｓｌｉｍ　先進国債券インデックス works well.

IMO these are the only two funds you need two in your Nisa and/or regular brokerage account at the moment. Keeping it simple reduces the chances you will make disastrous investment timing mistakes. You can allocate more or less to each fund based on your risk adversity. With your 20 year time horizon I would suggest a 70/30 stock bond allocation moving to 50-50 when you get closer withdrawing.

Equities

I disagree with your opinion here. US stocks have not always been the leader, and most likely will not continue to be forever. https://www.hartfordfunds.com/.../white ... CWP014.pdf
The more prudent thing to do is to choose a diversified global equities fund. (Such as Emaxis Slim All Country.)

That old saw about "X amount of S&P500 companies being international" cut both ways. X amount of internationally traded Ex-US companies also operate heavily in the US. Are they "American companies then?"

Bonds

You need to be aware of currency risk. There is no free lunch for YEN investors when it comes to bonds.