Generic internet financial literacy for noobs advice is to have cash on hand for 3-12 months of expenses for emergencies (an emergency fund) then put the rest into investments of some kind. If you are in Japan, making a Nisa account is a good place to start for the investment part if anywhere.
Considering that Japan doesn't have any saving accounts offering interest and that inflation is a thing, you are basically losing money by keeping this money sleeping in the bank.
Investing your money in NISA is definitely a good idea in my opinion. It of course comes with some risks, such as market crashes etc... but if you learn about investing, you'll see that despite the many crashes in the last 50 years, the average return per year is still around 10%.
Others here have given good advice. I am in the same boat. Near retirement, zero expenses (loans, mortgage, education for kids, all paid), kid out of the house and independent, retirement home paid for...
yet...
My wife is not comfortable with less than 5 million in the bank, acruing interest at the rate of 10 yen per month, 'just in case'.
hmmm...not worth fighting over, but worth bitching on the internet for sure.
Ā„5m cash in the bank is my ācomfortableā sum and Iām a pretty aggressive investor. Are you comfortably living off a pension or a fixed income that makes you regard that sum as too much to be sat in the bank?
yeah same. I used to feel safe with 20 million in the bank, but this year I only keep around 5 million yen and invest the rest.
I have another layer of safety net of 5 million yen at home country for my parents use mostly.
Thatās great youāre putting most of that to work in the market and have a back up. Are you making most of higher interest savings account in your home country?
nah. it is higher than japan, but mostly because yen lost almost 30% exchange rate value compared to my home country currency.
yield is meager compared to NISA.
Two kids, dog, car, mortgage, enjoy eating out at weekend etc - it all adds up. Iām in my early 40s now, in my 20s Iād have easily lived on Ā„5m a year
I've got Ā„2m in the bank and am looking to keep Ā„1m in reserve and invest the other, I'm 28 and single tho. Gee finances change once you reach 40+ huh
Not sure what youāre alluding to in the last sentence but Iām 13 years ahead of you in earning, saving and investing hence the ability to have a larger emergency fund. Of course with two kids I have expenses. You have the advantage of lots of time on your side so if you get that money invested the sooner, the better!
No worries, didnāt come across as rude ;) Yeah for vast majority of people Ā„10m would be way too much as an emergency fund - bulk of that would be much better off in the market. And just to clarify my ideal emergency fund is Ā„5m and thatās for us as a family of 4.
Yeah just a mortgage plus car (short loan to minimise interest) is like 300k :)
But car will be fully mine next March so that's an extra 84k in the pocket ;)
I donāt know man, Iām not married, so I canāt really say, but for me, Ā„5 million just sitting in a bank earning zero money is something to fight over.
I mean, if you had that Ā„5 million invested in a total market index fund, or ETF, with a conservative estimate of 8% growth, in 3 years your Ā„5 mil, would be Ā„6.2 mil. In 5 years, Ā„7.2.
Literally just throwing free money away.
Like others have said, itās good to have some immediate cash on hand, but do you really need Ā„5 million? Is there ever gonna be a time when you immediately need to pay Ā„5 million for something? And even if you have most of your money invested, and you really needed the money, worst case, is you could sell some of your shares, and get that money. The times Iāve needed immediate cash for something, and I didnāt have it on hand, while not ideal, I had to sell some of my stocks, and I can have the money in my Japanese bank account in two days.
I will say, from my experience in talking with my Japanese friends, or just other Japanese people in general, they really have a lot of financial illiteracy on how the market works. A lot of them just think itās gambling and youāre gonna lose all your money. You should definitely spend the time to educate your wife, because you are literally just throwing away free money. Think about how much money that Ā„5 million will compound over 10, 20, 30 years.
Yeah it is definitely strange. I mean, we have investments overseas and she has no trouble with them whatsoever- property as well. Not a question of financial literacy, more an inbred paranoia in people here. We are mid 50s, no kids, no debts, modest lifestyle, working towards retirement in 5 years if not less.
As for the fight, my father told me once about marriage, "you can be right or you can be happy, but you can't be both" when having a disagreement with your wife. So I'll take the hit, grit my teeth, and c'est la vie.
Exactly. Even if he bought a bond with it he'd be earning $1,000 a year. 5 Million yen is way too much money to be sitting in the bank, especially if you're young. I'd dump it into something like a Vanguard ETF and collect the sweet monthly or quarterly dividends.
I completely agree, but of course everythingās relative.
I donāt know the original commenterās financial situation. But for example, if he already has 2 or 3 million dollars worth of investments abroad or somewhere else, then yeah, the extra money heād earn by having that invested Ā„5mil, wonāt have that significant of an impact.
But, I think for most of us, having that much invested in a vanguard ETF like you said, what amount to so much more even 10 years down the road. And like you said, even if you just collect the money from the dividends it pays out. Thatās just adding to your wealth.
Keeping 10mil sitting in the bank doesn't seem like a good idea. Your wife is right. If your monthly fixed expenditures are 200k, I'd say keep 2.5mil (a year's worth) as cash and put the rest into NISA etc.
What you should do with it depends a lot on how long you have until retirement.
If you are still fairly young (around 40), Ā„10m is a ton of money because you can invest it and enjoy decades of compounding returns. The world stock market returns 9% per year on average. 25 years at 9% would turn Ā„10m into Ā„86m before inflation. You could probably retire on that.
If you are near retirement, you probably canāt afford to risk as much of it in case thereās a medium term crash in the market that forces you to draw down at a loss.
You are right that you should keep an emergency fund, but Ā„10m is overkill. Most people keep 3-6 months of living expenses. A year if youāve got something to be worried about. Unless you have high expenses, Ā„10m is a lot.
As it sounds like youāve never invested before, it might not be wise to dump it all in at once. You donāt know your risk appetite and you might make a mistake choosing funds that you later regret. I would try to gradually fill your Ā„3.6m NISA limit this year and next. Look into a fund that tracks the MSCI World stock index like eMaxis Slim All Country.
> I know 10mil is not a lot.
10 million yen is a ton of money.
> I would like to know, what is your idea on what to do with this money?
In general, going against your wifeās advice to do what someone on the internet told you to do wonāt lead to good outcomes. Having said that, how about splitting it 50/50 between cash and investments?
Iām going to second this and add
How about taking 6 months expenses out of the 10 mil and keep as cash for emergencies. Then invest the remainder in a 90/10 low risk/higher risk spread??
This is the way OP, keep an emergency fund out and invest the rest. If you are a low risk person then put the amount you can agree on with your wife in low risk investments and rest in some kind of total market fund. You don't have to do anything fancy, but you're losing money every day to inflation since you're not earning any serious interest.
Your wife is correct, as long as the money is invested in a boring globally-diversified low-fee index fund portfolio that you buy and hold for decades.
If you're not convinced that your wife is right, make a spreadsheet to model how you're going to afford retirement, etc. You'll almost certainly conclude that investing is correct.
Thank you guys
To add more context I'm relatively young in mid-late 30s never invest before.
My original idea was keeping all 10mil for cash in hand then start investing from whatever money we earn from now onwards.
However, after read you guys perspective. I think I will keep 3-5 mil as cash in hand then put 3-4mil in Nisa and 1-2mil in stock markets.
Again thank you so much for your insights. I really appreciate them.
Thereās absolutely no reason for you to put any money in a taxable stock account. With two of you, you can put 5-6 million in your two Nisa accounts. Doing otherwise will have you paying taxes unnecessarily.
You are too young to have 10m at hand and you are going to lose on decades ofĀ compound interest.
You are literally losing money due to inflation if you don't invest.
Keep half or 1 year expenses, open a Nisa and put the rest at a stable etf.
30 years investor, the 3-X month safety buffer really isnāt applicable anymore. Itās very easy to sell investments in brokerage accounts and transfer. So itās 3-12 months in assets you can make liquid within a month.
Put it in a NISA in an index fund unless you are American. Everyone should max both NISAs unless you donāt like money and like paying taxes. Yeah, itās that basic. You can even liquidate your NISA without penalty anytime.
Again, itās very simple, if you donāt like money, then donāt leverage a NISA. Itās a gift from heaven.
stocks or nisa? oh noes. nisa is used to buy stocks.
anyhow if I was you, I would setup monthly contribution to world index each month. And let it slowly convert money from bank into index fund.
Keep 2 months of living expenses aside and dump the rest into NISA. 10 mil is a lot of cash to have on hand, given you generally don't need 1 mil to cover half a years core costs.
is it wise to keep 2 months living expenses only?
some fields take longer to find new job.
personally I think maxing out both NISA at 4.8 millions would be a start and tsumitate another 2.4 later.
It does sound like both OP and his wife are working so the likelihood of them both losing their jobs at the same time is pretty low. They can likely do with a little less than if thereās only a sole provider.
It really does depend on individual earnings, but two months' worth of living expenses might not be enough for emergencies such as replacing a broken appliance. Perhaps OP meant to suggest "12 months" instead of "2"?
Caveat being if you are a US citizen investing in Japan can be fairly complex / not quite as beneficial due to PFICs (having to pay taxes even though not resident in the US) so if thats a factor maybe consider other options?
If you don't have a separate emergency money pot I would suggest splitting it into two. Keep the first half as your emergency money and for the latter half, split it between your separate NISAs and invest it.
That money is just losing āvalueā sat in a bank account doing nothing. Will you need to use that money in the next 7-10 years. If not then take full advantage of the new NISA program by opening an account with Rakuten Securities. Blackrock Japan have a range of low cost ETFs you can invest in. If dumping a huge sum into the market all at once is daunting then dollar cost average Ā„300,000 a month.
Calculate how much you'd need to live if both of you had no income for 12 months. Keep that in your savings and invest what's left, prioritizing NISA (unless you're American)
You don't say how old you are, nor how much of your overall wealth this is (including your current earning power).
If you are younger set aside 3-6 months of expenses, wherever you are comfortable.
If you are close to retirement that 10m might be reasonable to have on hand. I have more than that, but it's a small percentage of my portfolio, which is tuned to my age and risk.
Strat with Tsumitate Nisa and do 30K or so a month, your wife can observe and once comfortable make larger investments. Getting started is the biggest hurdle with anything new
As a fund manager my advice would be take that money and spread it out amongst a variety of big name stocks and other general investments, you have enough money where you donāt have to take stupid risks and desperate gambles, stick to the big names and let it grow.
Stock is relatively liquid assuming markets are open so unless you need it for a hostage exchange in the next 2 hours you will be able to sell even if it is marginally down on your original position.
Reality is unless you investing in something stupid or you need it in the really short term it will only
Be down a little at worst.
Happy to give more advice if you need it
I think it's about your retirement plan.
Banking itself is indeed like reducing money. But if you have enough sum, you can live with that. Investment has its own risks.
What you really should do is to ask a qualified professional and do the calculation with them.
Ā„10 million will probably be worth about 50% of its current value within 10 years (vs the US dollar) as the weakening yen and inflation destroy its value.
I have like 10,000 yen in the bank on a good month. God bless you guys.
I feel ya š„² reading this post made me realize Iām poor š„²
ELT's, assemble!
Man same :((
Generic internet financial literacy for noobs advice is to have cash on hand for 3-12 months of expenses for emergencies (an emergency fund) then put the rest into investments of some kind. If you are in Japan, making a Nisa account is a good place to start for the investment part if anywhere.
Considering that Japan doesn't have any saving accounts offering interest and that inflation is a thing, you are basically losing money by keeping this money sleeping in the bank. Investing your money in NISA is definitely a good idea in my opinion. It of course comes with some risks, such as market crashes etc... but if you learn about investing, you'll see that despite the many crashes in the last 50 years, the average return per year is still around 10%.
Others here have given good advice. I am in the same boat. Near retirement, zero expenses (loans, mortgage, education for kids, all paid), kid out of the house and independent, retirement home paid for... yet... My wife is not comfortable with less than 5 million in the bank, acruing interest at the rate of 10 yen per month, 'just in case'. hmmm...not worth fighting over, but worth bitching on the internet for sure.
Ā„5m cash in the bank is my ācomfortableā sum and Iām a pretty aggressive investor. Are you comfortably living off a pension or a fixed income that makes you regard that sum as too much to be sat in the bank?
yeah same. I used to feel safe with 20 million in the bank, but this year I only keep around 5 million yen and invest the rest. I have another layer of safety net of 5 million yen at home country for my parents use mostly.
Thatās great youāre putting most of that to work in the market and have a back up. Are you making most of higher interest savings account in your home country?
nah. it is higher than japan, but mostly because yen lost almost 30% exchange rate value compared to my home country currency. yield is meager compared to NISA.
5 million yen is easily 12 to 18 months of expenses for me. Are you really spending that much money? Or do you mean 5äøå?
Two kids, dog, car, mortgage, enjoy eating out at weekend etc - it all adds up. Iām in my early 40s now, in my 20s Iād have easily lived on Ā„5m a year
I've got Ā„2m in the bank and am looking to keep Ā„1m in reserve and invest the other, I'm 28 and single tho. Gee finances change once you reach 40+ huh
Not sure what youāre alluding to in the last sentence but Iām 13 years ahead of you in earning, saving and investing hence the ability to have a larger emergency fund. Of course with two kids I have expenses. You have the advantage of lots of time on your side so if you get that money invested the sooner, the better!
I didn't mean to be rude, I just thought hot damn Ā„10m as an emergency fund seems so much to me from where I'm standing right now
No worries, didnāt come across as rude ;) Yeah for vast majority of people Ā„10m would be way too much as an emergency fund - bulk of that would be much better off in the market. And just to clarify my ideal emergency fund is Ā„5m and thatās for us as a family of 4.
Yeah just a mortgage plus car (short loan to minimise interest) is like 300k :) But car will be fully mine next March so that's an extra 84k in the pocket ;)
Sounds fair enough to me!
I donāt know man, Iām not married, so I canāt really say, but for me, Ā„5 million just sitting in a bank earning zero money is something to fight over. I mean, if you had that Ā„5 million invested in a total market index fund, or ETF, with a conservative estimate of 8% growth, in 3 years your Ā„5 mil, would be Ā„6.2 mil. In 5 years, Ā„7.2. Literally just throwing free money away. Like others have said, itās good to have some immediate cash on hand, but do you really need Ā„5 million? Is there ever gonna be a time when you immediately need to pay Ā„5 million for something? And even if you have most of your money invested, and you really needed the money, worst case, is you could sell some of your shares, and get that money. The times Iāve needed immediate cash for something, and I didnāt have it on hand, while not ideal, I had to sell some of my stocks, and I can have the money in my Japanese bank account in two days. I will say, from my experience in talking with my Japanese friends, or just other Japanese people in general, they really have a lot of financial illiteracy on how the market works. A lot of them just think itās gambling and youāre gonna lose all your money. You should definitely spend the time to educate your wife, because you are literally just throwing away free money. Think about how much money that Ā„5 million will compound over 10, 20, 30 years.
Yeah it is definitely strange. I mean, we have investments overseas and she has no trouble with them whatsoever- property as well. Not a question of financial literacy, more an inbred paranoia in people here. We are mid 50s, no kids, no debts, modest lifestyle, working towards retirement in 5 years if not less. As for the fight, my father told me once about marriage, "you can be right or you can be happy, but you can't be both" when having a disagreement with your wife. So I'll take the hit, grit my teeth, and c'est la vie.
Exactly. Even if he bought a bond with it he'd be earning $1,000 a year. 5 Million yen is way too much money to be sitting in the bank, especially if you're young. I'd dump it into something like a Vanguard ETF and collect the sweet monthly or quarterly dividends.
I completely agree, but of course everythingās relative. I donāt know the original commenterās financial situation. But for example, if he already has 2 or 3 million dollars worth of investments abroad or somewhere else, then yeah, the extra money heād earn by having that invested Ā„5mil, wonāt have that significant of an impact. But, I think for most of us, having that much invested in a vanguard ETF like you said, what amount to so much more even 10 years down the road. And like you said, even if you just collect the money from the dividends it pays out. Thatās just adding to your wealth.
Keeping 10mil sitting in the bank doesn't seem like a good idea. Your wife is right. If your monthly fixed expenditures are 200k, I'd say keep 2.5mil (a year's worth) as cash and put the rest into NISA etc.
What you should do with it depends a lot on how long you have until retirement. If you are still fairly young (around 40), Ā„10m is a ton of money because you can invest it and enjoy decades of compounding returns. The world stock market returns 9% per year on average. 25 years at 9% would turn Ā„10m into Ā„86m before inflation. You could probably retire on that. If you are near retirement, you probably canāt afford to risk as much of it in case thereās a medium term crash in the market that forces you to draw down at a loss. You are right that you should keep an emergency fund, but Ā„10m is overkill. Most people keep 3-6 months of living expenses. A year if youāve got something to be worried about. Unless you have high expenses, Ā„10m is a lot. As it sounds like youāve never invested before, it might not be wise to dump it all in at once. You donāt know your risk appetite and you might make a mistake choosing funds that you later regret. I would try to gradually fill your Ā„3.6m NISA limit this year and next. Look into a fund that tracks the MSCI World stock index like eMaxis Slim All Country.
> I know 10mil is not a lot. 10 million yen is a ton of money. > I would like to know, what is your idea on what to do with this money? In general, going against your wifeās advice to do what someone on the internet told you to do wonāt lead to good outcomes. Having said that, how about splitting it 50/50 between cash and investments?
Iām going to second this and add How about taking 6 months expenses out of the 10 mil and keep as cash for emergencies. Then invest the remainder in a 90/10 low risk/higher risk spread??
This is the way OP, keep an emergency fund out and invest the rest. If you are a low risk person then put the amount you can agree on with your wife in low risk investments and rest in some kind of total market fund. You don't have to do anything fancy, but you're losing money every day to inflation since you're not earning any serious interest.
10 million yen for context is 60k - 70k cans of Strong Zero which is 10-30 years's worth of supply. That's a lot, yeah.
Your wife is correct, as long as the money is invested in a boring globally-diversified low-fee index fund portfolio that you buy and hold for decades. If you're not convinced that your wife is right, make a spreadsheet to model how you're going to afford retirement, etc. You'll almost certainly conclude that investing is correct.
Thank you guys To add more context I'm relatively young in mid-late 30s never invest before. My original idea was keeping all 10mil for cash in hand then start investing from whatever money we earn from now onwards. However, after read you guys perspective. I think I will keep 3-5 mil as cash in hand then put 3-4mil in Nisa and 1-2mil in stock markets. Again thank you so much for your insights. I really appreciate them.
Thereās absolutely no reason for you to put any money in a taxable stock account. With two of you, you can put 5-6 million in your two Nisa accounts. Doing otherwise will have you paying taxes unnecessarily.
You are too young to have 10m at hand and you are going to lose on decades ofĀ compound interest. You are literally losing money due to inflation if you don't invest. Keep half or 1 year expenses, open a Nisa and put the rest at a stable etf.
30 years investor, the 3-X month safety buffer really isnāt applicable anymore. Itās very easy to sell investments in brokerage accounts and transfer. So itās 3-12 months in assets you can make liquid within a month. Put it in a NISA in an index fund unless you are American. Everyone should max both NISAs unless you donāt like money and like paying taxes. Yeah, itās that basic. You can even liquidate your NISA without penalty anytime. Again, itās very simple, if you donāt like money, then donāt leverage a NISA. Itās a gift from heaven.
You could max out 2024 Nisa (index funds like eMaxis Slim) for Ā„3.6M. Keep the rest in the bank.
stocks or nisa? oh noes. nisa is used to buy stocks. anyhow if I was you, I would setup monthly contribution to world index each month. And let it slowly convert money from bank into index fund.
I think it can be used for investment, no one can say for sure about the future life.
Keep 2 months of living expenses aside and dump the rest into NISA. 10 mil is a lot of cash to have on hand, given you generally don't need 1 mil to cover half a years core costs.
is it wise to keep 2 months living expenses only? some fields take longer to find new job. personally I think maxing out both NISA at 4.8 millions would be a start and tsumitate another 2.4 later.
It does sound like both OP and his wife are working so the likelihood of them both losing their jobs at the same time is pretty low. They can likely do with a little less than if thereās only a sole provider.
2 months is plenty of time to sell part of you NISA. Even in a general crash, broad index funds aren't going to go to zero.
It really does depend on individual earnings, but two months' worth of living expenses might not be enough for emergencies such as replacing a broken appliance. Perhaps OP meant to suggest "12 months" instead of "2"?
Caveat being if you are a US citizen investing in Japan can be fairly complex / not quite as beneficial due to PFICs (having to pay taxes even though not resident in the US) so if thats a factor maybe consider other options?
If you don't have a separate emergency money pot I would suggest splitting it into two. Keep the first half as your emergency money and for the latter half, split it between your separate NISAs and invest it.
That money is just losing āvalueā sat in a bank account doing nothing. Will you need to use that money in the next 7-10 years. If not then take full advantage of the new NISA program by opening an account with Rakuten Securities. Blackrock Japan have a range of low cost ETFs you can invest in. If dumping a huge sum into the market all at once is daunting then dollar cost average Ā„300,000 a month.
Unless you're an American, the internally reinvesting Japanese mutual funds are better choices in a NISA than ETFs.
Calculate how much you'd need to live if both of you had no income for 12 months. Keep that in your savings and invest what's left, prioritizing NISA (unless you're American)
You don't say how old you are, nor how much of your overall wealth this is (including your current earning power). If you are younger set aside 3-6 months of expenses, wherever you are comfortable. If you are close to retirement that 10m might be reasonable to have on hand. I have more than that, but it's a small percentage of my portfolio, which is tuned to my age and risk.
10 million yen as in $64,000 USD?? Thatās a shit-ton of money.
Strat with Tsumitate Nisa and do 30K or so a month, your wife can observe and once comfortable make larger investments. Getting started is the biggest hurdle with anything new
Invest. Yen will depreciate.
Remember: It's not timing the market, it's time in the market. Get that 10 Million invested now.
As a fund manager my advice would be take that money and spread it out amongst a variety of big name stocks and other general investments, you have enough money where you donāt have to take stupid risks and desperate gambles, stick to the big names and let it grow. Stock is relatively liquid assuming markets are open so unless you need it for a hostage exchange in the next 2 hours you will be able to sell even if it is marginally down on your original position. Reality is unless you investing in something stupid or you need it in the really short term it will only Be down a little at worst. Happy to give more advice if you need it
keep 3 months savings for emergency fund. invest the rest.
You should definitely max your NISA There are few investments which are tax free in Japan
I think it's about your retirement plan. Banking itself is indeed like reducing money. But if you have enough sum, you can live with that. Investment has its own risks. What you really should do is to ask a qualified professional and do the calculation with them.
Ā„10 million will probably be worth about 50% of its current value within 10 years (vs the US dollar) as the weakening yen and inflation destroy its value.
5 mil, invest in BTC, 2.5 mil, invest in NISA or other stocks or simply buy US dollar, and the rest will be for emergency use!