RetireJapan

Thanks adamu and RJ. Yeah, the amount needed is surplus to what we can put in from monthly regular income.

2 is it? Hmm. I'm wondering what will happen if the market gradually drops in the next four years, due to the economy, geopolitics or exchange rates. Surely we wouldn't have enough to fill the NISA and we wouldn't be able to buy stocks cheap because there's no spare cash? But I suppose the chance of that happening is less than chance of it going up, which is why you chose number 2?

I do like the idea of drip-feeding it automatically every month though

If the market drops while you are drip feeding from a taxable account, more taxable funds will get put into the NISA faster, and if prices then recover, the larger amount will be tax protected.

I think you are dealing with the lump sum vs. DCA dilemma, it's not really a NISA question:

https://www.bogleheads.org/wiki/Lump-sum_investing

The only twist for NISA is you have to drip feed the Tsumitate portion for ¥100k/mo. You can choose to drip feed the Growth portion at ¥200k/mo or lump sum ¥2.4M annually.

northSaver wrote: ↑Fri Feb 21, 2025 11:23 am 5. Something I haven't thought of.

In a taxable account dump the lump sum into something like eMAXIS Developed Markets Bond fund.

Sell it off as you need to over four years to fund NISA purchases in tsumitate fashion.

The bond fund is not as risky as equities, but it’ll probably do better than leaving it in cash, even with Japanese interest rates having risen a little - still well below the rate of Japanese inflation.

The above is not my original idea - I read about it in a book by 朝倉智也, about how to go about living in the current age of inflation.

If you go for growth in taxable account that’s fine too, but if you want to avoid a drawdown due to unfortunate timing then the international bond fund is less likely to suffer that fate, while giving more protection of value in the interim. (There is a possibility that the currency could go against you, but history would suggest that’s unlikely, I forget the timeframe used in the book I refer to above but the evidence presented was that people can just go lump sum into a developed market bond fund with any surplus yen and forget about it. Not the case with equities.)

adamu wrote: ↑Fri Feb 21, 2025 1:09 pm If the market drops while you are drip feeding from a taxable account, more taxable funds will get put into the NISA faster, and if prices then recover, the larger amount will be tax protected.

I see what you mean. Since the sell/buy orders are based on cash value and not number of units, we'll be buying more units for the same price. But there's the risk of running out of money before the NISA is filled.

adamu wrote: ↑Fri Feb 21, 2025 1:09 pm I think you are dealing with the lump sum vs. DCA dilemma, it's not really a NISA question:

Yes, I suppose it is a "lump sum vs DCA" dilemma in regard to the holding account (taxable). I generally prefer DCA so maybe that's why option 2 is a little worrying to me.

I've since realised that in practice I will only be able to lump sum my taxable account and not my wife's, because I want to avoid gift tax as much as possible. This is the only tax I try to avoid because I strongly disagree with the principle of not sharing assets between husband and wife. So I'll continue to drip feed my wife's NISA with cash. If the tax office gets me then fair enough... but I don't want to make it easy for them.

Unless... (thinking aloud) I put the whole lot in my taxable account, then drip feed both NISAs from there?

sutebayashi wrote: ↑Fri Feb 21, 2025 9:53 pm In a taxable account dump the lump sum into something like eMAXIS Developed Markets Bond fund.

Sell it off as you need to over four years to fund NISA purchases in tsumitate fashion.
...

Thanks sutebayashi, I'll give this some thought. Initial concern is the fund's value falling due to an increasingly stronger yen and weaker USD, GBP, etc.

Away from keyboard this weekend so I'll get back to this next week. Thanks all.

northSaver wrote: ↑Fri Feb 21, 2025 11:27 pmBut there's the risk of running out of money before the NISA is filled.

If you put ¥3.6M in the NISA and it drops to ¥2M, you "filled" the NISA but now it's only worth ¥2M.

If you put ¥3.6M elsewhere, it drops to ¥2M and you move it to the NISA, you didn't fill the NISA, but the end result is the same. Actually it's better because you could theoretically move more taxable assets into the NISA, too (assuming the market always goes up eventually).

Not having enough to fill the NISA shouldn't be a consideration, is what I'm saying. DCA gives you the opportunity to move more taxable assets into the NISA when the prices drop. But you lose the tax protection you would have got by lump summing early if the prices rise.

If the asset types in taxable and NISA are different, then yes you could lose money, or do better but have to pay tax because you didn't put *that* asset in the NISA.

northSaver wrote: ↑Fri Feb 21, 2025 11:27 pm

sutebayashi wrote: ↑Fri Feb 21, 2025 9:53 pm In a taxable account dump the lump sum into something like eMAXIS Developed Markets Bond fund.

Sell it off as you need to over four years to fund NISA purchases in tsumitate fashion.
...

Thanks sutebayashi, I'll give this some thought. Initial concern is the fund's value falling due to an increasingly stronger yen and weaker USD, GBP, etc.

Yep, that’s some of the risk involved with any non-yen investment

I found an extract from the book I was referring to here:
https://diamond.jp/articles/-/323929?ut ... hatgpt.com

It has some data about the types of drawdown observed, with a worst case annual drawdown of less than 4%.

2. Fill the Nisa, use the lump sum tsumitste features as well. Put the rest in a taxable account.

We know lump sum is statistically the best choice, anything else is a behavioral decision.

I might add 5-10% to cash holdings, but I'm strictly equities/cash.

sutebayashi wrote: ↑Sat Feb 22, 2025 12:32 am Yep, that’s some of the risk involved with any non-yen investment

I found an extract from the book I was referring to here:
https://diamond.jp/articles/-/323929?ut ... hatgpt.com

It has some data about the types of drawdown observed, with a worst case annual drawdown of less than 4%.

I took a look at that link thanks. It looks good and safe, but I think that's down to currency movements more than anything. If you compare the performance of two similar international bond funds over the last five years, 2511 (unhedged) and 2512 (yen-hedged), then you will notice that the hedged one did a lot worse than the unhedged one, and was not safe at all!
However, you have got me thinking that a yen-hedged international bond fund might be a good play right now. Not so much for this "funding the NISA" task, but as part of my entire portfolio. Why? Well, the yen should be getting stronger relative to other currencies this year, and ex-Japan bond prices should be picking up due to falling yields. Good idea, I wonder, or doomed to fail?

adamu wrote: ↑Sat Feb 22, 2025 12:09 am Not having enough to fill the NISA shouldn't be a consideration, is what I'm saying. DCA gives you the opportunity to move more taxable assets into the NISA when the prices drop. But you lose the tax protection you would have got by lump summing early if the prices rise.

I agree that not filling the NISA within the next four years is not the end of the world. But the indisputable fact remains that if the holding account is pure cash, then the NISA will get filled come what may. The risk is that you miss out on potential (and probable) stock market gains in the holding account. Unless maybe you wait for a decent correction (10-20%) and then buy an index fund with the cash that remains.

Anyway, I've decided what to do. Half (for my NISA) will be index funds, and half (for my wife's NISA) will be cash. We'll win on one of them, just not sure which one yet

northSaver wrote: ↑Mon Feb 24, 2025 9:57 am the indisputable fact remains that if the holding account is pure cash, then the NISA will get filled come what may. The risk is that you miss out on potential (and probable) stock market gains in the holding account.

Ah, I see what you mean.

You're choosing to take on out of market risk so that you can fill the NISA and eventually get tax protection on ¥14.4M.
The risk then is that you lose out on more gains than you'll eventually save in taxes.

For example, if 2025 grew 10%, then you'll have lost out on that 10% growth for the funds still in cash slated for 2026 and 2027 (¥573,732 after tax). You're essentially paying a few ¥100k insurance to guarantee you won't lose money or pay any tax.

adamu wrote: ↑Mon Feb 24, 2025 11:46 am You're essentially paying a few ¥100k insurance to guarantee you won't lose money or pay any tax.

A few ¥100k of opportunity cost in insurance, as you wouldn't actually pay anything and would be better off if the prices dropped.

I'm not sure if I'm being helpful or just confusing myself, so I'll stop now.