Asset Management in the Era of Inflation” Although interest rates on deposits are rising… Why NISA is still the right choice over time deposits

As inflation continues, the asset value of deposits “diminishes”…

Asset management in a deflationary economy with falling prices was fine with bank deposits. Now prices are rising and interest rates have begun to rise. Although interest rates on deposits have risen a little, if inflation continues, prices will rise more than the rise in interest rates, and the asset value of deposits will diminish. What kind of asset management should we do to prepare for the future?

Life is full of expenses, such as education, home purchase, and retirement funds. Many people are saving for the future. Statistics show that more than 50% of Japanese household assets are in cash and deposits. Compared to Europe and the U.S., Japanese are considered to be cautious and reluctant to invest. On the other hand, assets can increase if they are well managed over the medium to long term, in addition to savings.

Therefore, the government has set up the “Asset Income Doubling Plan” to encourage people to move from savings to investment. To encourage investment behavior, it has begun to offer drastic preferential measures in the taxation of invested assets.’ The NISA system was launched in 2002, and the new NISA system will begin in 2012. When investing in stocks, investment trusts, and other financial instruments, dividends received and profits from the sale of such instruments are subject to a tax of approximately 20%, but this tax is exempted to a certain extent.

If you have money that you will not use for the next 10 years or so, you can invest it. If you have money that you will not use for the next 10 years or so, it is OK to invest it, but it is a hurdle to suddenly invest in stocks. Individual stocks fluctuate up and down depending on when you buy them, and the risk is high because you share the same fate as the company you are investing in.

Mitsuko Arita, a financial planner, says this. She provides consultation and advice on the money necessary for life. She recommends that you invest your money gradually over a long period of time, accumulating it in attractive financial products, and in doing so, use the tax exemption system. For stock investments, he cites financial instruments called “stock investment trusts.

You can mitigate the risk of fluctuation! To begin with, what is an “investment trust”?

An investment trust combines money collected from investors into one and professionally manages it by investing it in stocks, bonds, and other securities. Individuals can invest even small amounts. According to the Investment Trust Association, investors can easily start with as little as 10,000 yen, and there are also “savings investment trusts,” in which a fixed amount of money is purchased at regular intervals, such as monthly, allowing those without a large sum of money to invest for the medium to long term. Unlike buying individual stocks on one’s own, stock investment trusts mitigate the risk of fluctuations in individual stocks by spreading the money across several stocks.

According to the Japanese securities industry, spot equity investment trusts are set up in one-time offerings and aim to invest in a timely manner, focusing on companies with growth potential. The investment period varies depending on the product, but is mainly 5-7 years. On the other hand, open-type (additional type) equity investment trusts can be bought and sold at market value at any time. In addition to those that can be freely bought and sold at any time, there are also those that have a fixed date for sale and those that have a period of time during which they cannot be redeemed.

Looking at stock investment trusts alone, securities companies and other financial institutions independently select investment targets and offer a variety of financial products based on their own investment policies. Since fees and investment performance vary depending on the financial product, it is advisable to find a product that suits you.

One way to do this is to invest in such stock investment trusts, for example, by accumulating money little by little every year or every month within the framework of the tax exemption system provided by the government.

The assets will increase and decrease, but they will also increase steadily. It is important not to put a large sum of money into one investment, but to spread the money and the time of year over several investments.

The size of your mid- to long-term assets will be different from those who do nothing,” said Arita. The FSA says that it is a good idea to gradually increase the amount of money over a long period of time on its website, which it describes as “the basis of investment. It says that a “compound interest effect” can be expected if profits from investment are added to the principal and further invested. For example, if one invests 1 million yen and invests it at an annual rate of 10%, the assets will have increased to 2.59 million yen after 10 years. On the other hand, it is important to understand that there are various risks involved in investing, such as falling stock prices.

For example, if you look back at the “Nikkei 225” every 10 year-by-year look back…

Let’s look at the Nikkei Stock Average over a long period of time. Looking at the opening price at the beginning of the year by decade, it was ¥2402 in 1970, ¥6,560 in 1980, ¥38,921 in 1990, ¥18,937 in 2000, ¥10,609 in 2010, and ¥10,000 in 2011. It was 18,937 yen in ’00, 13,319 yen in ’10, and 23,319 yen in ’20. There was an extraordinary surge in the late 1980s, known as the bubble, and a long slump after the bubble burst, so it depends on which period you take. On November 20 of this year, the price temporarily reached 33,853 yen, the highest level in about 33 years and 8 months.

The current state of the Japanese economy is different from the long period of deflation; prices have begun to rise. Interest rates have remained very low, close to zero percent, but recently there have been phases in which long-term interest rates have risen to close to 1%. Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management, who looks at the investment environment, including the economy and interest rate trends, said, “The market is still in the midst of a five-year, 10-year, and 20-year period,” he said.

“Five to 10 years down the road, long-term interest rates are expected to rise by 2%. In the next five to ten years, long-term interest rates will be around 2%, short-term interest rates will be higher, and the economy will improve. We have been forcing interest rates to stay low, but as prices and wages rise, long-term interest rates are likely to rise as well.

Even those with limited investment knowledge and experience to gradually accumulate over the medium to long term.

Let’s take a closer look at the tax exemption system for invested assets introduced at the beginning of this article. There are major differences between the NISA introduced in 2002 and the new NISA starting next year. In addition to an increase in the tax exemption amount, the tax exemption period will be extended from finite to indefinite, making the new NISA more profitable if used properly.

The current NISA offers a choice of two types of investment. (1) Under the General NISA, you can purchase stocks and investment trusts up to 1.2 million yen per year and hold them tax-free for up to five years. The New NISA, on the other hand, allows investors to purchase up to 400,000 yen of stocks and mutual funds per year and hold them tax-free for a maximum of 20 years.

The New NISA, on the other hand, allows a combination of both a savings and a growth investment limit, and the tax exemption is for an indefinite period. The new NISA allows for the purchase and holding of certain investment trusts up to 1.2 million yen per year, for a total limit of 18 million yen. The growth investment limit is 2.4 million yen per year, up to 12 million yen of which can be held in listed stocks and investment trusts.

Even for those with limited investment knowledge and experience, there is a possibility that their assets will increase considerably in 10 or 20 years if they invest their money in stock investment trusts little by little over the medium to long term, as if they were accumulating.

Mr. Arita also cautions, “You need to be aware of the investment period and what you want to use it for.

You need to decide on your goals, such as how long you want to invest and what you want to use the money for. Even if you are worried about your retirement, you need to clearly express it in numbers. If it is a retirement fund, is it for 65 age or 70 years old? What kind of life do you want to lead in retirement? How much pension or retirement benefit will I receive?

Investment of assets is only a preparation for the future, and you want to manage your assets in a way that suits you.