¥1.2 million NISA Lump sum. First time. What to buy?!

[Ditto]

Hi guys, thank you for all the advice on the other topics so far.

iDeCo papers are sent and waiting for the post to deliver them. Will ask for advise before sending the application.

I got my SBI online broker account and NISA ready, and a lump sum of ¥1.2 million. After reading the forum posts and RetireJapan blog this is what I have learned so far ( correct me if wrong and feel free to add more things I should keep on my checklist before making a buying decision.

1. Buy low fee funds, ETF, index..
2. Avoid triple taxation.
3. Keep stocks with high yield, internally reinvested dividends.(correct me if that’s not the proper term) to max allowance.
4. Watch out currency exchange and hidden fees.
5. Don’t buy to resell since you will waste the yearly allowance.


It’s a good time since the “Show your NISA holdings of last year” is on and people are showing their progress and mistakes. I might as well dublicate or cherry pick from there but thought to make a post and ask for extra advice anyway. Being the first time I am hesitant to click the buy button, guess fear of failure/ mistakes is the greatest enemy in life.

So I am pretty tolerant to risk. Thinking of going from 20/80~100 bonds/stocks.

In my mind I have projected 2 scenarios:

A. Follow Bogleheads theory and go for a 3 fund portfolio:
Total Market Index, Total International Index, Total Bond Fund.

Or

B. Build a portfolio myself with your help lookingg something like this:

70% stock Domestic/ International/ emerging
20 % bonds Domestic/International
10% REITS, commodities, cash

I feel I would learn more about investing following the second scenario.


So following your success and learning from your mistakes what would be my first choices to buy. ( please give me specific stocks I can buy in Japan suitable for NISA)

Kind regards,

[fools_gold]

B. Build a portfolio myself with your help lookingg something like this:

70% stock Domestic/ International/ emerging
20 % bonds Domestic/International
10% REITS, commodities, cash

Hi Ditto,

I did this. It ended up pretty complicated and the temptation to tinker was far too great.

If you want to go this route, it's probably easier to build a similar portfolio by mixing a balanced fund with a few stock funds. For example, now I use E-Maxis Slim 8-way balanced fund (60%) and supplement it Japanese (10%), developed markets (20%), and emerging markets (10%) stock funds.
This gives me the following asset allocation:
22.5% bonds
15% REITS
17.5 % Japanese stocks
27.5% developed markets stocks
17.5% emerging markets stocks

I'll let you know how it performs in 20 years or so!

[RetireJapan]

A. Follow Bogleheads theory and go for a 3 fund portfolio:
Total Market Index, Total International Index, Total Bond Fund.

Or

B. Build a portfolio myself with your help lookingg something like this:

70% stock Domestic/ International/ emerging
20 % bonds Domestic/International
10% REITS, commodities, cash

I feel I would learn more about investing following the second scenario.

Hi Ditto

I wouldn't recommend following Bogleheads to that extent unless you are American and planning to return there. For non-US citizens you don't have to imitate their home country bias.

[DragonAsh]

IIRC you're still rather young. I personally wouldn't see much need to put 20% of money into bonds. Bond yields are coming off all-time lows and are heading higher (high bond yield = low bond price). My personal stance is I have very very little (essentially nothing) in bonds at the moment.

Emerging markets still offer better long-term growth prospects. Russia in particular is extremely cheap - of course, you could also wake up and find Putin now owns everything, so.... But there's a saying in finance that the best investments are the ones that everyone else hates and make you feel a bit queasy inside.

If you're young with an ample time frame to invest and are reasonably risk-tolerant, you could consider something like:
Emerging 40%
Developed 40%
Commodities/metals 10%
REITs 10%


The main issue with the balanced funds is that they'll have anywhere from 20-35% in bonds, which I hate right now, and they often won't have commodities/metals exposure.

[jcc]

As others have said, the bogleheads advice is good but US specific.

Outside of the US you have an important choice to make: do you want to take currency risk and invest in the US or do you want to avoid it and mostly invest domestically.

For myself, the risk of getting low returns outweighed the currency risk(and with dollar cost averaging and long term investing the variance on currency should be mostly eliminated).

As a result of this I've gone(after some initial mistakes)
20% bonds -> tawara
50% developed stocks -> eMaxis slim
20% domestic stocks -> tawara but probably shifting to nissei for future purchases
10% emerging stocks -> eMaxis slim

I'm using low-cost funds rather than etf's for everything because I don't really want to deal with the tax issues and having the dividends internally reinvested is nice. The math works out roughly the same long-term. Switching the developed stocks to a vanguard US-only ETF would give lower costs but it would result in less diversification and higher % exposure to the US(which is probably a good thing but you never know).

I'm not putting anything into commodities or reit because quite frankly I haven't done enough study into them.

Also worth considering the tax results of nisa: any losses you make can't be deducted, but at the same time putting low gain instruments(like bonds) in there is kinda underusing it

[fools_gold]

Ditto,

You might also want to check out this site. http://myindex.jp/user/myaa.php

It gives the historical returns of different asset classes in yen terms as well as allowing you backtest your portfolio. Of course, this is no guarantee of how any portfolio will perform in the future.

I've also found robo-advisor sites, such as Rakuwrap and Theo, to be a good resource for ideas.

[Ditto]

IIRC you're still rather young. I personally wouldn't see much need to put 20% of money into bonds.

If you're young with an ample time frame to invest and are reasonably risk-tolerant, you could consider something like:
Emerging 40%
Developed 40%
Commodities/metals 10%
REITs 10%

Thank you for the reply. Its really helpful to get a broader view and advice from more experienced investors in Japan.
After reading over 2000 pages from J.C.Bogle and others:
The little book of common sense investor.
The intelligent Investor.
Your Money or Your life.
Millioner Teacher and Millioner Expat.
Bogleheads' guide to investing.
Enough.
The 4 pillars of investing.
The simple path to wealth,

I wouldn't consider not keeping a small percentage in bonds and neither should you.

[Ditto]

As others have said, the bogleheads advice is good but US specific.

Interesting. Boglehead's recommend a 3 fund portoflio :

Total World index
Total Domestic Index
Developed Bond Index ( your age in bonds)

Can't it be applied in Japan as well?

I was considering building my first portfolio like this

40% Domestic for example:
ｅＭＡＸＩＳ ＴＯＰＩＸインデックス (should be reinvesting the dividends internally) or 1348 ＭＡＸＩＳトピックスＥＴＦ

40% World
1550 ＭＡＸＩＳ海外株式 or ｅＭＡＸＩＳ 国内物価連動国債インデックス (should be reinvesting the dividends internally)
maybe some VT and VTI but the dont wanna pay much US taxes, currency exhange fees and don't think dividends are reinvested internally since they are ETFs.

Bonds
10% domestic
ｅＭＡＸＩＳ Ｓｌｉｍ 国内債券インデックス
10% developed countries
ｅＭＡＸＩＳ Ｓｌｉｍ 先進国債券インデックス

[Ditto]

If you want to go this route, it's probably easier to build a similar portfolio by mixing a balanced fund with a few stock funds. For example, now I use E-Maxis Slim 8-way balanced fund (60%) and supplement it Japanese (10%), developed markets (20%), and emerging markets (10%) stock funds.
This gives me the following asset allocation:
22.5% bonds
15% REITS
17.5 % Japanese stocks
27.5% developed markets stocks
17.5% emerging markets stocks

I'll let you know how it performs in 20 years or so!

Thank you. Really appreciate the advice.

Kind regards,

[Ditto]

Ditto,

You might also want to check out this site. http://myindex.jp/user/myaa.php

I've also found robo-advisor sites, such as Rakuwrap and Theo, to be a good resource for ideas.

Thank you for the link, will give it a try asap. I was looking at WealthNavi the other day but isn't the 1% fee pretty steep?