Why I, who also tried US ETFs, decided to focus on S&P 500 mutual funds

What should I buy for NISA?
I am currently investing in mutual funds, but should I buy other products too?
I get a little curious when I hear about high-dividend stocks or high-tech stocks.

In this article, for those people, I will summarize what criteria we used to settle on our current investment strategy after trying US ETFs as well.

To conclude, we decided on a simple investment strategy centered on S&P 500 mutual funds.
We went through trial and error until then, but now we have no doubts.

I looked into it, wondering if there might be a better way

Previously, I had purchased not only mutual funds but also US ETFs. ETFs are mutual funds that can be bought and sold on an exchange like stocks.

I also considered VOO, which tracks the S&P 500, and VTI, which invests in the entire US stock market. I even owned VTI at one point. However, I judged that there was no need to go out of my way to buy more of these because their investment targets overlap with the index funds I already hold.

Although I also considered HDV, VYM, and SCHD, which allow you to receive dividends, I ultimately did not end up purchasing any of them.

There was also a time when I invested in QQQ with the ulterior motive of “maybe I’ll hit the jackpot,” keeping in mind investments in high-tech companies and the like.

As you continue to invest, even while thinking that your current method is fine, you naturally get curious about whether there is a way to increase your returns even more.

Know your investment targets before increasing the number of products

What concerned me when thinking about VOO and VTI was the overlap with the S&P 500 mutual funds I already held.

VOO is an ETF that aims to track the same S&P 500. VTI is not the same because it targets the entire US stock market, including small and mid-cap stocks, but they overlap in that they contain many large-cap US stocks.
Roughly speaking, it all comes down to the US as a whole.

QQQ is an ETF that tracks the NASDAQ 100. Since the S&P 500 also includes major US growth companies, adding QQQ would further increase the investment ratio in overlapping companies and the like.

If you add more meat to a hamburger, it might be too heavy.

Feeling that way, I stopped feeling the need to increase the ratio that much.
I thought that since the S&P 500 is already well-balanced, there is no need to combine various products with it.

Even if the product names are different, the investment targets are not necessarily significantly different.

This is something you want to check before buying a new product.

Now that we are a dual-income household, do we need dividends?

With high-dividend ETFs like HDV and VYM, I was interested in being able to receive dividends.

However, in our current life where both of us are able to work, I did not really feel the need to receive money regularly from investments.

I have sold all the ETFs I previously held and moved them into my NISA. After researching and experimenting, my investment strategy has settled into a simple core.

What I buy in my NISA and what I continue to hold

Currently, what my spouse and I are buying in our NISA accounts is “eMAXIS Slim US Equity (S&P 500).”

There are products with similar names that can be confusing, so when you look them up, please check the full name, including “Slim.”

All-country equity funds, so-called “Orkan,” are also an option.
While we have chosen a policy of focusing our investments on US stocks, this does not mean that US stocks will necessarily be advantageous in the future.

In my taxable account, I continue to hold the “SBI-V-S&P 500 Index Fund” that I purchased when I first started investing. When the new NISA started, there was the option of using this to fill it, but I weighed that against the fact that selling it would trigger taxes, and I decided it was better to keep holding it.

Although there are differences in how they operate, there are many products that aim to track the S&P 500.

If you are choosing a new mutual fund that tracks the same index, you should compare the costs incurred while holding it. For products that include costs for the underlying ETFs, be sure to check those as well.

Japanese high-dividend stocks: a small experiment in “spending”

While I focus on index investing, I also hold a very small amount of Japanese high-dividend stocks.

You might wonder why I hold them when I don’t really feel the need for dividends right now. I even think to myself that maybe everything should just be in index funds.

However, while I have stoically contributed funds and steadily built assets, there was a price to pay. As a result of investing almost all my surplus funds for a long time, I have become a bit bad at spending money.

Perhaps it would be good to cover some living expenses with dividends or to earn income that I feel is “money I can spend.”
I am currently hoping that I can come to feel that way.

I am still in the experimental stage, but from now on, I want to get used to not just increasing my money, but also spending it.

When in doubt, check these three things

If you are unsure whether to increase your investment targets, please check the following three things.

• The difference from the products you currently hold. How much do the investment targets overlap?

• Are you looking for capital gains, or do you want to receive money periodically?

• Can you explain in your own words why you are adding that product?

Through our experience, we realized that even during uncertain times, there is no need to increase the variety of products.

This is not to say that the S&P 500 is the right answer for everyone. Choose a method that fits your own life and goals, and keep it in a form you can continue. Once you buy a good product, hold onto it without wavering.
I hope this serves as a helpful example of that decision-making process.

“Think carefully about what to buy. Once you have chosen properly, just keep at it steadily.”

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*This article introduces the experiences and perspectives of the Honu family and does not recommend the purchase of any specific product. Please check the latest prospectus and other documents for product details and costs before purchasing.