[Japan] - Newbie Advice

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Topic Author
jonconner
Posts: 4
Joined: Wed Jun 23, 2021 12:00 am

[Japan] - Newbie Advice

Post by jonconner »

Country of Residence: Japan

International Lifestyle: UK resident and unclear if I will stay in Japan or retire in the UK.

Currency: USD

Emergency funds: I have 6 month emergency funds.

Debt: No debt.

Age: 41

Desired Asset allocation: Im not sure on how I should spread out my funds xx% stocks / xx% bonds (indicate if you are not sure)


I currently have 50,000 pound in my UK account and 25,000 USD in my JP bank account.

I have an account with IBKR and I have about 700-1000 a month to invest.

Was looking at a targeted Vanguard pension or two three spilt portfolio,

Any help you guys will be. great help.

many thanks
Laurizas
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Location: Lithuania

Re: [Japan] - Newbie Advice

Post by Laurizas »

TedSwippet
Posts: 3759
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: [Japan] - Newbie Advice

Post by TedSwippet »

Welcome.
jonconner wrote: Wed Jun 23, 2021 12:51 am Country of Residence: Japan
International Lifestyle: UK resident and unclear if I will stay in Japan or retire in the UK.
These statements appear contradictory. Are you a UK citizen living in Japan, or a Japanese citizen living in the UK? (Or something else?!) Also, I'm assuming you are not a US citizen or US green card holder?

To get you started, potentially applicable wiki pages:

Investing from Japan - Bogleheads
Investing from the UK - Bogleheads
Topic Author
jonconner
Posts: 4
Joined: Wed Jun 23, 2021 12:00 am

Re: [Japan] - Newbie Advice

Post by jonconner »

Hi

Thanks for you let reply.

I’m a UK citizen living in Japan
TedSwippet
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Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: [Japan] - Newbie Advice

Post by TedSwippet »

jonconner wrote: Wed Jun 23, 2021 4:11 pm I’m a UK citizen living in Japan
That's a decent set of circumstances. The US tax treaties with Japan are as good as they come; 10% US tax on dividends (which undercuts the 15% US/Ireland rate on UCITS ETFs), and no US estate tax worries, under both the US/Japan and US/UK estate tax treaties. You can use US domiciled funds or ETFs, EU domiciled ones, or Japan domiciled ones as desired. The investment world is your oyster!

I'd suggest a close look at the 'Investing from Japan' wiki page, with a NISA as perhaps your first port of call. As a non-UK resident you won't be able to use a UK ISA.

On pensions, using whatever your country of residence offers is usually best. You'll find it hard, I think, to use a UK pension. To the extent that you could open one at all, any contributions may well not be tax-efficient. No UK tax relief (because no UK tax liability), and Japan would likely not allow tax relief either, though you might check the UK/Japan tax treaty closely to see if that offers any interesting scope for planning.

At age 41, a rule of thumb gives around 60% stock and 40% bonds, but that's just a vague starting point, something to consider. At present, returns from bonds are pretty well negative, so pretty unattractive. You could tackle this by replacing bonds with some form of certificates of deposit, or whatever is the Japanese equivalent. Or, you could bump up your stock holding instead. It's at least as much art as science, and there is no easy answer, just whatever lets you sleep at nights.

Finally, you mentioned the possibility of 'target date' funds. My own view is that these solve a problem that mostly no longer exists -- they shift from stocks to bonds over time on the sort-of assumption that you will use funds to buy an annuity at retirement. But, annuity rates these days are extremely low, so that most people won't do that, but will probably stay invested across retirement. To me, that makes a simpler 'lifestyle' fund, such as something from the Vanguard LifeStrategy range, a better bet. I have no idea how accessible this type of investment would be to a Japanese resident (for that, you need local knowledge, and I have none!).
Topic Author
jonconner
Posts: 4
Joined: Wed Jun 23, 2021 12:00 am

Re: [Japan] - Newbie Advice

Post by jonconner »

Thank you so much for your reply.

I have a pension in Japan and Uk.

I’m not a permanent resident here so I can get the Japanese ISA (NISA)

I look at your comment and do some research this weekend.

Also is the boggle head three find book good for my situation?

Thanks
rhe
Posts: 118
Joined: Sun Feb 26, 2017 2:10 am

Re: [Japan] - Newbie Advice

Post by rhe »

jonconner wrote: Wed Jun 23, 2021 4:52 pm Also is the boggle head three find book good for my situation?
Interest rates are effectively zero in Japan, and so your Japanese bank account is almost the same as holding government bonds. The simplest possible portfolio would be to keep some yen in your bank account, and then put your remaining money into some Vanguard total world stock fund.

More complicated portfolios emerge when you consider trying to minimize the amount of tax you are going to pay:
1. Japanese stocks should be held in Japan, because otherwise the dividends are taxed both going out of Japan and coming back in.
2. If you haven't been in Japan for 5 years, you may be able to avoid paying tax on non-Japanese dividends by holding them outside of Japan
3. If you hold US stocks in a US-domiciled ETF, you can claim a tax credit on the US tax withheld
4. If you hold European stocks in an accumulating ETF, you may (?) be able to defer taxes on dividends until you sell (at which point you pay a capital gains tax instead)

(If you hold US bonds, note that you are effectively engaging in the "carry trade", which can be profitable but is an advanced strategy. You may be better off just buying more stock instead)
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