RetireJapan

Hi all,
Thanks to retirejapan I now have NISA & IDECO up and running.
I will be paying in the maximum amount of ¥23,000 a month from my salary every month into IDECO,my question is for example if I want to buy say ¥500,000 of a certain index fund and the price is fluctuating every month over the space of 21 months my provider SBI (in the case of NISA anyway,I presume it’s the same for IDECO) said they will calculate the average cost every month and that will be the buying cost.
Which is fine, but I’m now 37 years old, say, if I wanted to buy more of this index fund when I’m 50 and the price has hopefully increased significantly by that time, it would drive up the cost of the stock I already own.
Is the answer as simple as don’t buy it when I’m 50!??
Or is there a much simpler way I’m missing?
Sorry if I’m just simply overthinking this!
TIA

I believe there are two ways to deal with this:

One is to take the average price of all the units you bought and use it to calculate your profit etc.
Another is to keep track of how much you paid for each unit and keep track of them. When you sell, you can calculate the tax separately for each unit.

I think Rakuten just uses the former method.

Anyone have a better explanation?

I'm sure I am misunderstanding something, but if your average buying cost goes up, then your selling gain will be less, reducing your tax liability. What would the problem be?

goodandbadjapan wrote: ↑Tue Jul 03, 2018 8:50 pm I'm sure I am misunderstanding something, but if your average buying cost goes up, then your selling gain will be less, reducing your tax liability. What would the problem be?

Quoted straight frrom the retire Japan guide to IDECO " There are no taxes on dividends or capital gains within the account"

Yes, that's right about the tax but what I wasn't getting was with regard to this:

Tomthumb16 wrote: ↑Tue Jul 03, 2018 9:20 am Which is fine, but I’m now 37 years old, say, if I wanted to buy more of this index fund when I’m 50 and the price has hopefully increased significantly by that time, it would drive up the cost of the stock I already own.
Is the answer as simple as don’t buy it when I’m 50!??
Or is there a much simpler way I’m missing?
Sorry if I’m just simply overthinking this!
TIA

Why would the average cost of stock you already own going up be of any concern? As I said, I am likely missing something. I am still very green to this, so am just trying to actually understand things better!

goodandbadjapan wrote: ↑Wed Jul 04, 2018 1:39 pm Yes, that's right about the tax but what I wasn't getting was with regard to this:

Tomthumb16 wrote: ↑Tue Jul 03, 2018 9:20 am Which is fine, but I’m now 37 years old, say, if I wanted to buy more of this index fund when I’m 50 and the price has hopefully increased significantly by that time, it would drive up the cost of the stock I already own.
Is the answer as simple as don’t buy it when I’m 50!??
Or is there a much simpler way I’m missing?
Sorry if I’m just simply overthinking this!
TIA

Why would the average cost of stock you already own going up be of any concern? As I said, I am likely missing something. I am still very green to this, so am just trying to actually understand things better!

Say for example if I now buy ¥500,000 of a index fund that’s trading a ¥2,400 per share.
If i want to but the same index fund,same amount, when I’m 50 and its trading a ¥4,000 per share the average cost of my index fund would be ¥3,200 per share, hence I would be making less money per share.

PS:I read your humorous post on Facebook..you’re not that green!!

Tomthumb16 wrote: ↑Wed Jul 04, 2018 4:29 pm
Say for example if I now buy ¥500,000 of a index fund that’s trading a ¥2,400 per share.
If i want to but the same index fund,same amount, when I’m 50 and its trading a ¥4,000 per share the average cost of my index fund would be ¥3,200 per share, hence I would be making less money per share.

PS:I read your humorous post on Facebook..you’re not that green!!

But the number of shares you originally held hasn't declined because of this; they are just worth more than they were when you bought them. I don't see why you would be making less money on the units you already own. If what you are saying is correct then that seems an important consideration to understand.

Thanks for reading the post. (But I made my first ever purchases for mu NISA on Monday this week, so quite green but eager to learn!)

goodandbadjapan wrote: ↑Wed Jul 04, 2018 11:07 pm

Tomthumb16 wrote: ↑Wed Jul 04, 2018 4:29 pm
Say for example if I now buy ¥500,000 of a index fund that’s trading a ¥2,400 per share.
If i want to but the same index fund,same amount, when I’m 50 and its trading a ¥4,000 per share the average cost of my index fund would be ¥3,200 per share, hence I would be making less money per share.

PS:I read your humorous post on Facebook..you’re not that green!!

But the number of shares you originally held hasn't declined because of this; they are just worth more than they were when you bought them. I don't see why you would be making less money on the units you already own. If what you are saying is correct then that seems an important consideration to understand.

Thanks for reading the post. (But I made my first ever purchases for mu NISA on Monday this week, so quite green but eager to learn!)

Well, if we use the example I posted above I would rather be making ¥1,600 per share than ¥800 per share.
Buy low, sell high. When I eventually do sell my shares I want to make as much as I can out of them.

Think we might be talking at cross purposes. To take simple numbers, lets say you have $30 to spend and units cost $1 dollar each. You buy thirty.

When you are fifty you have another $30 to spend but the price has risen to $3 a unit so you buy ten.

You now have 40 units for which you paid $60. They are worth $120.

The average price you paid is $1.50.

Now you sell them. It doesn't matter what your average price paid for them has become, you will have paid a total of $60 and get $120. It could matter for tax purposes as it would affect the amount of gain made, but as tax isn't an issue here that is irrelevant. To object to the average price increasing seems to be objecting to the fact that the units are now more expensive, but it is that very fact that has seen your original 30 triple in value.

If the price hadn't increased by the time you were fifty and had remained at $1 you would have bought another thirty. In other words you would own 60 units for which you had paid an average of $1. If you sold them you would get $60, which is what you paid. So a higher average price and double your money, or the same average price and no profit.

Now my brain hurts and I'm probably still not making sense!

Now I’m starting to doubt my own math!
We may need someone else to weigh in here..