What happens to your assets 10 years after you stop investing? | The compound interest effect of the new NISA

I started investing at age 63 and have been steadily building my savings every month.
I would like to continue investing in mutual funds for as long as possible.

However, once you retire and start living on a pension, it is not easy to set aside funds for investing like you used to.

So, I took another look at how the new NISA works.

A major feature of the new NISA is that the tax-exempt holding period has become indefinite.

In other words, even if you stop making contributions, you can continue to manage the mutual funds you have already purchased tax-free.

For example, suppose you invest 30,000 yen every month for 20 years.
The principal invested is 30,000 yen x 12 months x 20 years = 7.2 million yen.
Assuming an annual return of 5%, it would grow to approximately 12.33 million yen after 20 years.

And here is the interesting part.

What happens if you stop investing after 20 years and continue to manage the assets for another 10 years?
Assuming the same 5% annual return, it would grow to approximately 20.31 million yen.

Even though I haven’t added a single yen, the assets have grown.

Of course, this is a simulation based on a 5% annual return.
In reality, assets can decrease depending on market conditions.

Even so, with the new NISA, you don’t have to worry about the tax-exempt period ending just because you stopped making contributions.

For me personally, I am now at an age where I should think about how to manage my existing assets rather than increasing my contributions.

Whether to continue investing or stop for a while.

I think it is a great feature of the new NISA that you can decide based on your own lifestyle.

Note: The old NISA, which existed until 2023, has a time limit on the tax-exempt period. I still hold mutual funds purchased under the old NISA, so I intend to check when their tax-exempt periods end.

Note: The simulation is based on investing 30,000 yen at the end of each month with a 5% annual return calculated using monthly compounding. Investment gains are reinvested, no withdrawals are made during the period, and taxes and fees are not considered.

Reference: Financial Services Agency “Learning about NISA”

https://www.fsa.go.jp/policy/nisa2/know/

Note: This article is a record of my personal experience. Please invest at your own risk.
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