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“NISA” is a small investment tax exemption system that exempts tax on investment profits within a certain range. The new NISA system, which will start in 2024, has attracted much attention when it was announced that the tax exemption limit will be greatly expanded.
Did you know that you can purchase domestic and foreign exchange traded funds (ETFs) at NISA? Unlike ordinary investment trusts, ETFs are listed on stock exchanges, so they can be traded by placing orders such as “buy” and “sell” on the exchange, just like stock trading.
In this article, we have compiled a detailed explanation of NISA and the domestic and foreign ETF stocks that can be purchased with NISA in a ranking format. Take advantage of NISA’s tax incentives and improve your investment efficiency.
1. ETFs (Exchange Traded Funds) can be purchased with a NISA account and exempted from taxation
First, I will briefly explain the outline of NISA as prerequisite knowledge.
NISA, which was introduced in January 2014, is an abbreviation for “small investment tax exemption system” and is a tax exemption system to promote asset building of individual investors. NISA is categorized into three types: “General NISA”, “Junior NISA” and “Tsumitate NISA”, each with different tax exempt periods and investment targets.
For example, if you hold financial products in a “general NISA” account, tax on sales gains, dividends, ordinary distributions, etc. will be exempt for five years. However, profit and loss cannot be aggregated with transfer gains or dividends generated in other accounts.
As an example, a NISA account allows you to trade financial instruments such as:
- stock
- Domestic/overseas listed stocks
- Domestic/overseas ETFs, ETNs
- Domestic/overseas REITs
In addition, in the “Tax Reform Outline” dated December 16, 2022, it was announced that the general NISA and Tsumitate NISA systems will be made permanent and the tax exemption limit will be expanded. Specifically, the name of the general NISA will be changed to “growth investment quota” and the annual investment limit will be doubled. In addition, the annual investment limit for Tsumitate NISA will be expanded to three times the current level.
2. How to choose ETF stocks and their merits and demerits
Next, we will introduce the points to pay attention to when selecting ETF stocks, as well as the advantages and disadvantages of domestic and overseas ETFs.
2-1. Points for choosing ETF stocks
First, when looking for ETF stocks that suit your investment style and conditions, it is a good idea to pay attention to the following five points.
- Product content
- Dividend
- Liquidity
- operating costs
- Deviation rate
First of all, it is “product contents”. The content of ETFs varies from those suitable for long-term asset management with little price fluctuation to leveraged ETFs suitable for short-term trading. Let’s choose according to the conditions.
Also, check the “dividend”. Many ETFs have dividends, so please understand the timing and number of times, amount and yield conditions.
In addition, high “liquidity” makes it easier to buy and sell at the desired price, and lower “operation costs” increase the profit margin, so it can be said to be an important factor.
“Deviation rate” is the difference between the index that the ETF tracks and the rate of change of the NAV of the ETF. The smaller the deviation rate, the higher the linkage with the reference index, so it is better to choose the one with a deviation rate close to 0%.
2-2. Advantages and disadvantages of domestic ETFs
Below are the pros and cons of ETFs.
Simply put, an ETF is a product in which funds collected from a large number of investors are pooled together and invested in multiple financial instruments by an asset management expert. It is characterized by low management costs and the ability to automatically adjust the asset allocation of investees according to market trends.
The biggest advantage is that you can easily diversify your investment.
In addition, since domestic ETFs have low trust fees, investment costs can be kept low. Trust fees are investment management fees paid to experts who manage ETFs, and are borne by investors who hold ETFs.
The average trust fee for domestic ETFs has been announced as “0.060% to 0.950%”, and it can be seen that most ETFs are set at 1% or less. (Reference: myINDEX)
On the other hand, the disadvantages of ETFs are the same as general financial products, such as the risk of loss of principal, and the exchange risk when including products related to overseas.
2-3. Advantages and disadvantages of overseas ETFs
Foreign ETFs are ETFs that mainly include foreign stocks and bonds. Since overseas ETFs target the products in which they are invested, it is easier to diversify risks than ETFs that only contain domestic products, and the ability to manage assets globally is a major advantage.
The disadvantage of overseas ETFs is the large exchange rate risk. When holding ETFs denominated in foreign currencies, in addition to normal price fluctuation risks, exchange fluctuation risks must also be considered. For example, if you buy a U.S. ETF in the US dollar and the yen depreciates against the dollar, you run the risk of incurring losses due to foreign exchange losses even if the ETF itself rises.
In addition, for overseas ETFs, it is necessary to collect information on the situation of the country related to the price movements of the investment products included in the ETF for investment decisions, and it can be said that the difficulty of collecting information is higher than for domestic ETFs. .
In addition, if you hold foreign ETFs in your NISA account, you should be aware that you cannot apply for the “foreign tax credit”.
Foreign tax credits are a mechanism to prevent double payment of taxes. Regarding taxes that occur when investing in securities overseas, by deducting the taxable amount that occurred in the country of investment from Japanese income tax and resident tax, we will adjust so that there is no double taxation for one investment profit.
Please note that foreign tax credits are not available on NISA accounts, so they are not exempt from taxes collected abroad.
Next, see the ETF popularity ranking provided by SBI Securities, which has the largest number of securities accounts opened as of April 2023, and the mutual fund purchase value ranking provided by Rakuten Securities, which has the second largest number of accounts opened. We will introduce domestic ETFs and overseas ETFs that can be purchased with a NISA account in a ranking format.
3. Ranking of domestic ETFs available at NISA
We have summarized the ETFs listed on the domestic market that can be purchased with NISA in a ranking format.
3-1. 1st place: NEXT FUNDS Nikkei 225 Double Inverse Index ETF (1357)
| NEXT FUNDS Nikkei Stock Average Double Inverse Index ETF |
| stock |
| Nomura Asset Management |
| once a year |
| TSE ETFs |
| 5/20 |
| 0.88% |
(Reference: Rakuten Securities)
NEXT FUNDS is a series of ETFs managed by Nomura Asset Management, which has a top-class share of ETF trading value and balance in Japan.
Among the ETFs offered by NEXT FUNDS, the Nikkei Stock Average Double Inverse Index ETF is particularly popular. Ranked No. 1 in both SBI Securities and Rakuten Securities rankings.
This ETF aims to track the investment performance of the Nikkei Stock Average Double Inverse Index, which is calculated to be “- (minus) twice” the fluctuation rate of the Nikkei Stock Average. Negative 2x means that the price movement is opposite to that of the underlying index and the price movement is doubled.
An ETF that tracks an inverse index is effective as a means of hedging the downside risk of holdings such as stocks, and this ETF can be said to be a representative example.
On the other hand, however, if the holding period is prolonged and the underlying index repeatedly rises and falls, the difference (deviation) between the price of this ETF and the underlying index tends to widen. In general, it is not suitable for medium- to long-term investment, and it can be said that it is suitable for capturing short-term price movements in the market.
3-2. 2nd place: Rakuten ETF Nikkei leveraged index (1458)
| Rakuten ETF Nikkei Leveraged Index |
| stock |
| Rakuten Investment Management |
| once a year |
| TSE ETFs |
| 3/15 |
| 0.385% |
(Reference: Rakuten Securities)
Rakuten ETF is a series of ETFs operated by Rakuten Investment Management, a company affiliated with Rakuten Securities.
Rakuten ETF Nikkei Leveraged Index, one of Rakuten ETFs, is an ETF that aims to track the Nikkei Stock Average Leveraged Index, which has double the volatility of the Nikkei Stock Average. Derivatives such as stock index futures and Japanese short-term bonds are the main investment targets.
In addition, it is ranked 10th in the purchase price ranking of Rakuten Securities, which was referenced.
The advantage of a leveraged index-linked ETF is that you can efficiently increase your assets when the underlying index is in a rising market.
However, on the other hand, for the same reason as the inverse index-linked type, it is easy to deviate from the price movement of the index, and it is not very suitable for medium- to long-term holding.
3-3. 3rd Place: Listed Gold Trust (Domestic Physical Custody Type) (1540)
| Pure Gold Listed Trust (Domestic Custody Type) |
| merchandise |
| Mitsubishi UFJ Trust and Banking |
| – |
| TSE ETFs |
| – |
| 0.440% |
(Reference: Rakuten Securities)
“Pure Gold Listed Trust (Domestic Physical Custody Type)” is one of the precious metal ETF series “Golden Fruit” managed by Mitsubishi UFJ Trust and Banking, and is an ETF that aims to track the price of pure gold. It was ranked 8th in the ETF/ETN popularity ranking provided by SBI SECURITIES.
The pure gold price in this ETF refers to the theoretical price obtained by converting the futures price of gold on the Osaka Exchange to the present value at the same day’s forward rate (interest rate for a certain period starting from a future point in futures trading). increase.
The attractiveness of this ETF is that it allows you to invest in pure gold without making a small investment and without the risk of storage costs or theft. Gold investment is attracting attention as a means of hedging inflation, but when purchasing physical pure gold, an initial investment of at least tens of thousands of yen is required. However, with this ETF, you can purchase from a minimum of 100 yen, and there is no need to deal with the hassle and cost of storing the actual product and the risk of theft. Another feature of this ETF is that the holding value can be exchanged for physical gold.
On the other hand, there is no distribution amount, etc., and it is not suitable as a method of aiming for income gain.
reference:
SBI SECURITIES ETF/ETN popularity ranking | SBI SECURITIES (Data collection period: April 10, 2023 to April 14, 2023)
Ranking: NISA-Domestic Stocks/Domestic ETF/ETN | Market Information | Rakuten Securities (Data collection period: March 1, 2023 to March 31, 2023)
4. Ranking of overseas ETFs available at NISA
Next, we will introduce ETFs listed on overseas markets that can be purchased with NISA in a ranking format.
5-1. 1st place: Direxion Daily Semiconductor Stock Bull 3x ETF (SOXL)
| Direxion Daily Semiconductor Stocks Bull 3x ETF
(Direxion Daily Semiconductor Bull 3X Shares) |
| stock |
| U.S. dollar |
| Direxion |
| 4 times a year |
| NYSE・ARCA |
| – |
| – |
(Reference: Rakuten Securities)
Direxion is a leading US ETF manager, offering ETF products to investors around the world.
Among the wide variety of stocks offered by Direxion, the one that is particularly popular in Japan is the Direxion Daily Semiconductor Equity Bull 3x ETF. It ranked first in the ranking of SBI Securities and seventh in the ranking of Rakuten Securities.
This ETF is a product that aims to track three times the price movements of the ICE Semiconductor Index, a stock index published by the Intercontinental Exchange (ICE) that aims to track 30 companies in the semiconductor sector in the U.S. stock market.
With 3x leverage, it is possible to efficiently aim for profit when the underlying index is in a rising market. On the other hand, keep in mind that the expense ratio is high and there is a risk of a sudden drop.
5-2. 2nd place: Vanguard S&P 500 ETF (VOO)
| Vanguard S&P 500 ETF
(Vanguard 500 Index Fund ETF) |
| stock |
| U.S. dollar |
| Vanguard |
| 4 times a year |
| NYSE・ARCA |
| – |
| – |
(Reference: Rakuten Securities)
Founded in the United States, Vanguard is one of the world’s largest ETF management companies with offices around the world.
The “Vanguard S&P 500 ETF” provided by Vanguard ranked 4th in the Rakuten Securities ranking and 6th in the SBI Securities ranking. It consists of stocks with particularly large total amounts among stocks listed on the U.S. market, and aims for investment results linked to the “S&P 500 Index,” which represents the performance of the U.S. stock market.
The appeal of this ETF is that it can invest in the S&P 500, which has recorded high performance over the past 40 years, and the expense ratio is “0.03%”, which is extremely low compared to general US ETFs. .
However, as of April 2023, the minimum purchase amount is approximately 50,000 yen (approximately 380 USD), making it not suitable for small investments.
5-3. 3rd place: Vanguard Total Stock Market ETF (VTI)
| Vanguard Total Stock Market ETF
(Vanguard Total Stock Market Index Fund ETF) |
| stock |
| U.S. dollar |
| Vanguard |
| 4 times a year |
| NYSE・ARCA |
| – |
| – |
(Reference: Rakuten Securities)
The Vanguard Total Stock Market ETF is another ETF product offered by Vanguard. It ranked 3rd in the ranking of Rakuten Securities and 7th in the ranking of SBI Securities.
This ETF is managed with the aim of tracking investment results linked to the “CRSP US Total Market Index,” an index published by the Center for Securities Price Research (CRSP) at the University of Chicago.
This index comprehensively targets large-, medium-, and small-cap stocks in the U.S. stock market, and is known for covering almost 100% of investable stocks in the U.S. stock market.
Common stock indices, including the S&P500, often target only large-cap stocks, but with this ETF, you can invest in the entire US market. In addition to the stability of large-cap stocks, you will also benefit from the growth potential of small- and medium-cap stocks. In addition, this ETF also has an expense ratio of 0.03%, making it attractive to invest with minimal operating costs.
On the other hand, just like the Vanguard ETF introduced in second place, be aware that the minimum purchase amount is relatively expensive.
reference:
Our Weekly Trading Value Ranking | SBI SECURITIES (Data collection period: April 17, 2023 to April 21, 2023)
Ranking: NISA-Foreign Stocks/Overseas ETFs | Market Information | Rakuten Securities (Data collection period: March 1, 2023 to March 31, 2023)
5. Save tax with a NISA account if you invest in ETFs
We have explained domestic and foreign ETFs that can be purchased with NISA and the purchase price of domestic and foreign ETFs in a ranking format. As with cryptocurrency investment, NISA must select financial products after assuming all possible risks.
Why not use this article as a reference and use it as an opportunity to start investing in domestic and overseas ETFs?
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