Looking for super basic terminology clarification...

[sketmachine13]

So, I have a lot of money just collecting dust in my savings account earning nothing...so I figured it's time to make a change. I've only started reading and looking stuff up this week, so I'm basically no better than a student who took a business class for a month and dropped out.

From what I gathered...

IF a company is a Pizza store....

stocks
A part of the company
(a slice of pizza)

Mutal Funds
A basket/group of stocks managed by a fund manager
(Manager goes out and makes sample platter of slices from different stores, 2 from Pizza hut, 2 from Dominoes, 2 from food market, 2 from frozen pizza)

Index Funds
Same as a Mutal Fund but less work from the fund manager? (Manager just picks up a phone and orders every item on the menu from ONE store)

ETF
A basket/group of stocks that cannot be seperated and is managed by you?
(You order a 4-in-one pizza, 2 slices of each style in one pizza)

With all of them earning money the same way, from dividend payouts and the differnece in value of when you purchased it and its current value when you sell it? I understand I'm dumbing it down so a lot of the finer details are lost but Is the general idea correct?


Also, I noticed lots of people here use Rakuten for their investment needs. Is there a specific reason to open an account with Rakuten over doing it in-person at a Bank (Mizuho, SMBC)?

I hope to open an NISA and iDeCo account next week (if I have it, it might motivate me to keep going), are there any tips for beginners like me? Like, stick with Index funds to get a feel for things? Or buy this specific ETF since its super safe to learn with (probably doesnt exist..)?

Any help or advice is also greatly appreciated! Thanks in advance!

[Sybil]

Anyone else being bombarded with pizza ads from Google ads after clicking on this thread?

[StockBeard]

With all of them earning money the same way, from dividend payouts and the differnece in value of when you purchased it and its current value when you sell it? I understand I'm dumbing it down so a lot of the finer details are lost but Is the general idea correct?

I'd say generally you got it right.

Also, I noticed lots of people here use Rakuten for their investment needs. Is there a specific reason to open an account with Rakuten over doing it in-person at a Bank (Mizuho, SMBC)?

In my experience, and I think most people on this board, "typical" banks don't have the right funds/ETFs and charge too much for them. online brokers such as rakuten and SBI have better prices and better selection. ("better" is a euphemism here. We're talking of differences that can be life changing for your financial future)
Personal experience: a friend of mine in Japan got frustrated when I talked to him about lazy portfolios, low fees, "passive investing with index funds", when clearly I was "lying" to him: none of the banks he went to had such a thing as a "world index", let alone for fees below 0.5%.

I hope to open an NISA and iDeCo account next week (if I have it, it might motivate me to keep going), are there any tips for beginners like me? Like, stick with Index funds to get a feel for things? Or buy this specific ETF since its super safe to learn with (probably doesn't exist..)?

What I personally did: got all my information in English on US-based forums so I could understand in general the principles of what I was looking for and what I was confident with, then tried to transcribe those general principles into what's available in JP, with help from this forum. Assuming you're more fluent in English than in Japanese (Definitely my case), I'd say you still need to go through step one here: understand what you want, your level of risk, etc... on English-language forums (typically US centric but the same principles apply) then come back again here with an idea of your ideal portfolio, and dig in this forum to get JP equivalents.

Some of my thought process described in the link below if this helps (but everyone's case is specific. I've tried in the past to "enforce" my own investment choices onto a friend in order to make it easier for him because that's what he asked for, only for both of us to end frustrated because my personal risk/volatility tolerance was different from his.)
viewtopic.php?f=2&t=679#p5611

[Petronius]

I don't eat much pizza so I will drop your metaphor whilst trying to answer the questions.

Stocks are pieces of a business.
An Index fund is a basket of securities that track a financial index. It is a type of Mutual fund.
Mutual funds are a basket of securities (stocks, bonds etc.) that are traded only once a day, after the market closes.
An ETF (Exchange traded fund) is a basket of securities that trades on a market, just like a stock.

The main advantage of Index funds and ETF that track an index is that they do not require much work from the financial institution offering them and therefore come with lower fees than other funds.
It has also been proven that they outperform most other actively managed funds with the same level of risk.
They also allow for easy diversification across the different investment risks (company level, industry level, geography level) depending on the index they track.

As for where to open a brokerage account, online brokers (Rakuten, SBI etc.) usually have lower transaction fees than brick and mortar banks as well as a larger choice of low cost funds.

[captainspoke]

sketmachine13,

It'd be nice if you'd confirm if you are US or not, since that can make a difference in what your choices might be.

[sketmachine13]

Thanks for all the replies! Feeling confident in opening up an account with Rakuten and trying things out for myself. I should probably just open a Rakuten bank account too, just to keep things streamlined...

sketmachine13,

It'd be nice if you'd confirm if you are US or not, since that can make a difference in what your choices might be.

Ah, sorry! I'm Canadian (B.C, specifically), currently living in Japan.

What I personally did: got all my information in English on US-based forums so I could understand in general the principles of what I was looking for and what I was confident with, then tried to transcribe those general principles into what's available in JP, with help from this forum. Assuming you're more fluent in English than in Japanese (Definitely my case), I'd say you still need to go through step one here: understand what you want, your level of risk, etc... on English-language forums (typically US centric but the same principles apply) then come back again here with an idea of your ideal portfolio, and dig in this forum to get JP equivalents.

Thanks! I'll do just that! I was going into this with the plan of just "dipping my toes in" first. Mainly, just want to buy some stocks/funds and sit on them/reinvest the dividends. Maybe a flight home once a year paid for from dividends would be nice once I figure things out.

The main advantage of Index funds and ETF that track an index is that they do not require much work from the financial institution offering them and therefore come with lower fees than other funds.
It has also been proven that they outperform most other actively managed funds with the same level of risk.
They also allow for easy diversification across the different investment risks (company level, industry level, geography level) depending on the index they track.

Right, I did read/hear that index funds, on average, produce better results than actively managed funds. I'm pretty risk-adverse and lazy so I think Index funds are the way to go for me. Can't see myself needing the ability to cash-out mid-day that ETFs offer. Or at least not yet.