New NISA《Monthly Investment Limit》 《Growth Investment Limit》 for “30s and 40s” and “50s”…How to use each of them

In your fifties, your salary income is at its highest. We want to save money at all costs.”

The “New NISA” was launched in ’24 with a major upgrade.

First of all, the system itself has been made permanent, so there is no longer an investment deadline and new investments can be made at any time. The tax exemption period is now indefinite, and tax on investment income is exempted for the lifetime of the investment.

The annual investment limit was changed from “nasate” to “tsumitate” and tripled from ¥400,000 to ¥1,200,000 per year. The General NISA was renamed the “Growth Investment Limit,” and the annual investment limit was doubled from 1.2 million yen to 2.4 million yen.

In addition, the new NISA will allow both investment limits to be used together, so that a total of 3.6 million yen can be invested per year. However, the new NISA does not allow a lifetime investment of 3.6 million yen per year, but a lifetime investment limit of 18 million yen per person is set.

The “reserve investment limit” alone can be used for 18 million yen, while the “growth investment limit” alone can be used up to 12 million yen.

In addition, under the new NISA, if you sell a product and have room in your lifetime investment limit, you can reuse that limit for investment.

As for investment products, the “reserve investment limit” can be used for investment trusts and ETFs (Exchange Traded Funds) that meet the requirements set by the Japanese government, just as in the case of the “Temporary Investment Limit”. At the time of this writing, there are approximately 270 products in the lineup.

The “Growth Investment Limit” is basically the same as the General NISA, but excludes “stocks under liquidation or supervision,” “investment trusts with trust periods of less than 20 years,” “highly leveraged investment trusts,” and “investment trusts that pay out monthly distributions.

All of these products are deemed unsuitable for long-term asset building and are excluded. At the time of this writing, there are approximately 1,800 mutual funds in the “growth investment lineup.

Let us now consider how to use the New NISA’s “Advance Investment Limit” and “Growth Investment Limit” for people in their 30s, 40s, and 50s, respectively.

Four Principles of the New NISA for All Generations

First, we would like to share with you the 4 principles of the New NISA that are common to all generations.

◇1_Practice “long-term, accumulation, diversified” investment and “low cost

You cannot get returns without risk. However, as long as there is risk, there is a possibility of losing money. To deal with this risk and increase your money steadily, it is important to engage in long-term, accumulated, and diversified investments.

The Financial Services Agency’s “Let’s Start! NISA Quick Reference Guidebook” by the Financial Services Agency shows the annual rate of return on savings investments made since 1989 with the same amount of money in domestic and foreign stocks and bonds each month.

The distribution of investment rates of return shows that they vary over a holding period of 5 years. It is also clear that there are periods when the principal amount is underperforming. On the other hand, for a 20-year holding period, there have been no cases of loss of principal since 1989, and the rate of return has ranged between 2% and 8% per year.

We can see that in order to reduce the risk of loss of principal as much as possible, it seems necessary to continue accumulation and diversification for 20 years or more. In other words, 20 years is one standard for “long-term.

It is also important to keep the cost of investment low. In particular, choose products with low “trust fees,” which are charged while holding mutual funds.

◇2_Determine the “appropriate investment amount” according to your assets and household finances

Do not start the new NISA under the situation that is impossible for you in terms of assets and household finances. While investments can increase your money, they can also decrease it. Also, if you start investing with almost no savings, you will not be able to cope with problems such as injury, illness, or restructuring.

You would want to secure at least six months’ worth of living expenses in a savings account or other secure asset that can be withdrawn immediately without losing principal.

In addition, no matter how upgraded the new NISA is, it is not suited for preparing money that you know you will use within 5 or 10 years, such as a down payment for a home or the purchase of a car. For such money, it is better to use time deposits or individual government bonds, which are less prone to loss of principal and allow you to increase your money as much as possible, and do not try to use the New NISA for everything.

◇3_Practice of “core-satellite strategy

The “core-satellite strategy” is a strategy to increase money without decreasing it. In the core-satellite strategy, your assets are divided into “core assets” for long-term stable growth and “satellite assets” for active management.

The core-satellite strategy is to be implemented in the new NISA.

In the New NISA, core assets, which account for 70% to 90% of total assets, are investment trusts such as index funds and balanced funds, and ETFs (exchange-traded funds). For the satellite assets, equity investments in Japanese and U.S. stocks and active funds are candidates.

Under the new NISA, strategies to manage 100% of core assets or to utilize a hybrid of core and satellite assets are possible.

◇4_Asset allocation and product selection according to risk tolerance

Basically, the most popular strategy is to take your time to build up your assets by using the New NISA’s “Installment Investment Limit”.

The “Advance Investment Line” allows you to invest in a lineup of low-cost products that are suitable for the aforementioned “long-term, accumulation, and diversified investment”. Since mutual funds themselves are diversified investment products, there is no need to invest in more than one product.

Some people may want to invest freely in the “Growth Investment Line,” but it is better to start with the “Maintenance Investment Line” and use it in the next step.

Choose investment products according to your risk tolerance (how much you can afford to lose). Risk tolerance varies from person to person.

If your risk tolerance is low, a “balanced mutual fund” that invests in stocks and bonds in a single fund would be a good choice, while an “index mutual fund” that invests in global stocks would be a good candidate if you want to take risks aggressively.

For example, “Nissay Index Balanced Fund (4-asset equalization type)” and “eMAXIS Slim Balanced (8-asset equalization type)” are recommended as low-cost products for those who want to increase steadily with less risk. For those who want to actively take risks and increase their investments, “eMAXIS Slim Global Equity (All Country)” and “SBI V U.S. Equity Index Fund” are recommended as low-cost products.

How to Use the New NISA for People in Their 30s and 40s

For those in their 30s and 40s, who have various life events ahead of them, the main use of the new NISA will be to steadily increase their assets while withdrawing necessary funds as needed.

Strategies for utilizing the reserve and growth investment limits include

• (1) Create core assets in the savings account.
• (2) Build core assets in the savings account and invest a small amount in individual stocks as a satellite asset in the growth account.

(2) Build core assets in a single investment line and invest a small amount in individual stocks as satellite assets in a growth investment line

In addition to investing in balanced or index mutual funds in accordance with your risk tolerance, you can also invest a small amount in individual stocks in the “growth investment line”.

In addition, you can invest a small amount in individual stocks in the “Growth Investment Limit” in addition to the investment in a balanced or index mutual fund, depending on your risk tolerance.

How “50s” can use the new NISA

In your 50s, your salary income is probably the highest in your life so far. It is also a time when households with children have reached the end of their financial years. This is the last time to save before retirement, so you should do your best to save money.

If it is possible to invest 100,000 yen per month in the new NISA (New NISA Investment Portfolios), then that is what you should aim for. If your assets and finances are in good shape, you can use the “Growth Investment Line” to increase your monthly savings. You can also use the “Growth Investment Line” to invest in products that are included in the “Installment Investment Line”.

The strategy for using the New NISA’s “Advance Investment Line” and “Growth Investment Line” can be the same as for those in their 30s and 40s, but it is also a good idea to invest in “assets that provide unearned income” in anticipation of the asset withdrawal period after retirement. It is not a pleasant feeling to have your assets simply decrease after retirement.

This strategy is to invest in high dividend stocks, high dividend stock funds/ETFs (Exchange Traded Funds), bond funds/ETFs, REITs (Real Estate Investment Trusts), REIT funds/ETFs, etc. in the “Growth Investment Line” to earn unearned income in the form of dividends and distributions after retirement. High-dividend stocks and high-dividend stock funds/ETFs have higher expectations for asset growth, and the more your assets increase, the more dividends and distributions you will receive in the future.

For example, if you invest in high-dividend stocks and have assets of 10 million yen after retirement, you can receive 400,000 yen in dividends tax-free every year if the dividend yield is 4%.

Do not jump into high-dividend stocks based solely on their high dividend yield. The dividend yield is calculated as “dividends per share ÷ share price × 100,” and includes stocks with “high dividend yields due to falling share prices. The main reason for a decline in the share price is deteriorating business performance. If earnings continue to deteriorate, the possibility of a “dividend cut” or “no dividend” increases. If the company reduces or does not pay dividends, the share price will fall further.

Choose stocks carefully to ensure that they are performing well and that they are financially sound.

The new NISA offers more flexibility and a wider range of strategies. Take your time and make the most of the New NISA according to your assets, finances, and risk tolerance.

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