NISA re-allocation 2023

[Bubblegun]

I was wondering, if this idea has any legs. I also maybe overthinking.

This year I used all my NISA allowance very quickly, in May or June (ish) but instead of sitting on my extra cash, I dropped it into the S&P500 E-maxi.
Now I am wondering about next years allowance.

Is it worth taking out next years NISA allocation from the E-MAXI account in December (from the extra overpayments I've done in 2022) and move the whole of next years allowance into 2023 NISA account in January. Thereby moving money that would pay tax,( if withdrawn) and moving it into the TAX free element? Especially if the market is still in the bear market.
I hope that makes sense.

EG Ive payed an extra 2 million this year. So is it worth taking out next years allowance in December, from the 2 million yen, and using all of next years allowance in January 2023, Then to continue to spot buy 20,000 yen every month.

[TokyoBoglehead]

I was wondering, if this idea has any legs. I also maybe overthinking.

This year I used all my NISA allowance very quickly, in May or June (ish) but instead of sitting on my extra cash, I dropped it into the S&P500 E-maxi.
Now I am wondering about next years allowance.

Is it worth taking out next years NISA allocation from the E-MAXI account in December (from the extra overpayments I've done in 2022) and move the whole of next years allowance into 2023 NISA account in January. Thereby moving money that would pay tax,( if withdrawn) and moving it into the TAX free element? Especially if the market is still in the bear market.
I hope that makes sense.

EG Ive payed an extra 2 million this year. So is it worth taking out next years allowance in December, from the 2 million yen, and using all of next years allowance in January 2023, Then to continue to spot buy 20,000 yen every month.

Regular Nisa is mostly advantageous to those who

A. Can make a large lump sum deposit early in the year (January/February), or
B those who are not planning to stay in Japan past 10 years.

If you are taking most of the year to fill your regular Nisa, you are probably better of with Tsumitate~Taxable in my opinion. The longer period of tax-free gains of the tsumitate, will negate the large initial deposit size of regular Nisa.

Selling down taxable holdings, and rebuying is not optimal. With Mutual funds as the transactions can take a few days and you can miss larger market movements. However, with ETFs this is not a big deal. Forcing yourself to realize the gains or losses is also not optimal.

I would suggest leaving this as is, and moving to a Tsumitate next year.

[eyeswideshut]

I was wondering, if this idea has any legs. I also maybe overthinking.

This year I used all my NISA allowance very quickly, in May or June (ish) but instead of sitting on my extra cash, I dropped it into the S&P500 E-maxi.
Now I am wondering about next years allowance.

Is it worth taking out next years NISA allocation from the E-MAXI account in December (from the extra overpayments I've done in 2022) and move the whole of next years allowance into 2023 NISA account in January. Thereby moving money that would pay tax,( if withdrawn) and moving it into the TAX free element? Especially if the market is still in the bear market.
I hope that makes sense.

EG Ive payed an extra 2 million this year. So is it worth taking out next years allowance in December, from the 2 million yen, and using all of next years allowance in January 2023, Then to continue to spot buy 20,000 yen every month.

I guess it depends where the market is at in December but if the market remains down then that would definitely make sense as you would have no gains (and maybe even a loss) from the sale and would be buying in to your NISA at a lower price potentially harvesting more tax free gains.

[mighty58]

To provide a slighy different perspective to some of what's been written above:

If you are taking most of the year to fill your regular Nisa, you are probably better of with Tsumitate~Taxable in my opinion. The longer period of tax-free gains of the tsumitate, will negate the large initial deposit size of regular Nisa.

This advice I'd have to label as questionable, as it relies upon a number of unknowable assumptions coming true. Generally speaking, long-term, the more money in the market, the earlier, the better for long-term gains. Now, if you only have 400,000 to invest in the first place, that's another story, but I'm assuming you have 1.2m here.

Selling down taxable holdings, and rebuying is not optimal.

Absolutely. It's best if you can put new fresh money into your NISA each year. Second-best alternative is to sell a different asset, as part of a rebalancing of the entire portfolio. Selling the same thing, taking the tax hit, and just buying it again, is nonsensical.

With Mutual funds as the transactions can take a few days and you can miss larger market movements. However, with ETFs this is not a big deal.

Don't worry about one or two day fluctuations in market price. Seriously. Keep your horizon long term.

[TokyoBoglehead]

To provide a slighy different perspective to some of what's been written above:

If you are taking most of the year to fill your regular Nisa, you are probably better of with Tsumitate~Taxable in my opinion. The longer period of tax-free gains of the tsumitate, will negate the large initial deposit size of regular Nisa.

This advice I'd have to label as questionable, as it relies upon a number of unknowable assumptions coming true. Generally speaking, long-term, the more money in the market, the earlier, the better for long-term gains. Now, if you only have 400,000 to invest in the first place, that's another story, but I'm assuming you have 1.2m here.

Selling down taxable holdings, and rebuying is not optimal.

Absolutely. It's best if you can put new fresh money into your NISA each year. Second-best alternative is to sell a different asset, as part of a rebalancing of the entire portfolio. Selling the same thing, taking the tax hit, and just buying it again, is nonsensical.

With Mutual funds as the transactions can take a few days and you can miss larger market movements. However, with ETFs this is not a big deal.

Don't worry about one or two day fluctuations in market price. Seriously. Keep your horizon long term.

Point1 1. People have crunched the number on this forum. The extra 10 years of tax-free gains makes a huge difference. You can run the numbers yourself in Excel.

This method would have you investing as soon as you have the funds. So it does not run counter to your plan. (You can lump sum Tsumitate, using the bonus system).

There is also the outside change existing Tsumitate Nisas might have the 20 year limit removed. (See current statements by the PM/Finance minister about the future of the NISA).

Point 3. - Global Mutual funds can take as long as a week to settle sometimes.

There is always a risk! Just something to consider.

RANK Date Return
1 Oct. 13, 2008 11.6%
2 Oct. 28, 2008 10.8%
3 March 24, 2020 9.4%
4 March 13, 2020 9.3%
5 March 23, 2009 7.1%
6 April 6, 2020 7.0%
7 Nov. 13, 2008 6.9%
8 Nov. 24, 2008 6.5%
9 March 10, 2009 6.4%
10 Nov. 21, 2008 6.3%

[mighty58]

Point1 1. People have crunched the number on this forum. The extra 10 years of tax-free gains makes a huge difference. You can run the numbers yourself in Excel.

This method would have you investing as soon as you have the funds. So it does not run counter to your plan. (You can lump sum Tsumitate, using the bonus system).

You'll have to define what's being compared, and the assumptions being made, but I'm guessing you're referring to discussions previously that compared maxing out over the terms, and assuming no fresh money allowed into regular NISA after 2028? That may change, as you've said (for both regular and tsumitate), but yes, the total amounts after 20 years in that comparison did (slightly) favour the Tsumitate.
My point was a far simpler and more obvious one, which was comparing any given year by itself; that 1.2m invested today will ALWAYS grow to become much more than 0.4m invested today after 20 years, assuming the same underlying investment (even if you're paying cap gains on the 1.2m)

Point 3. - Global Mutual funds can take as long as a week to settle sometimes.

Not to quibble, but mutual funds have a 約定日 and a 受渡日, and the yakuteibi is when the price is determined. This usually happens two business days after you click "sell", and the price is determined then. The ukewatashibi, when you get your cash in-hand, is what takes a week.

[Bubblegun]

Thanks for everyones input there.

[Bubblegun]

Thanks for everyones input. If I can put new money in in January i'll max it out, and continue to DCA.
I just wondered if the S&P was stall falling if it was worth realizing that small loss,( because any profits they make, would not to tax free when the rebound happens) and then putting the full amount into next years tax free allocation. Then again it is only 400,000 next year.So I could probably just drop in the cash in January anyway.