How to Start Basic Investments and Build Wealth

Does it sound like a dream? But with the right knowledge of investing, it’s entirely possible.

In Japan, where the cost of living is high and public pensions alone often cannot guarantee a secure retirement, knowing how to make your money work for you is an essential skill.

Whether you’re a complete beginner or someone who has heard about investing, this guide is designed to help you in a simple and practical way.

What Is Investing, and Why Should You Start Now?

Investing means putting your money into something with the potential to grow in value over time. This could include stocks, real estate, or even cryptocurrencies.

The key difference between saving and investing is that saving is about storing money (like depositing it in a bank), while investing aims to grow your money.

Why should you invest? Here are three main reasons:

For Retirement: In Japan, even with the public pension system (Nenkin), the amount received is often insufficient to cover all living expenses.
To Achieve Dreams: Whether it’s buying a house, starting a business, or traveling the world, investing can help you achieve these goals.
To Protect Your Money: Over time, inflation decreases the value of money. Investing can help protect against this loss of value.

Understanding Japan’s Financial System

Investing in Japan might seem complex at first, but the country boasts one of the most organized and secure financial systems in the world. For example, the Tokyo Stock Exchange (TSE) is one of the largest stock exchanges globally, offering numerous opportunities for investors.

Additionally, the Japanese government regulates and protects investors, ensuring fair and transparent operations.

One of the advantages of investing in Japan is the variety of investment options available. Programs like *Tsumitate NISA* allow small, regular investments with tax exemptions, making it easy to start small.

Types of Investments Available in Japan

Japan offers a wide range of investment options suitable for all styles of investing. If you prioritize safety, fixed-income investments such as bonds are ideal.

For those seeking higher returns and willing to take on more risk, variable-income investments like stocks are a great fit.

Moreover, options like real estate, cryptocurrency, and gold are also available. Below are the main types of investments in Japan to help you find the ones that best align with your goals.

Fixed-Income Investments

For safety-conscious investors, fixed-income investments are a reliable choice. Examples include:

Japanese Government Bonds (JGBs): Considered one of the safest investments, where you lend money to the government and receive interest payments.
Certificates of Deposit (CDs): Offered by banks, these guarantee fixed returns for a set deposit period.

Variable-Income Investments

If you’re ready to aim for higher returns and take on some risk, consider the following:

Stocks: Buy shares in a company to profit from its value growth and dividends (profit-sharing from the company).
Index Funds (ETFs): A convenient way to invest in multiple companies at once, reducing risk.

Real Estate

Investing in real estate in Japan is a solid option. Beyond purchasing property, you can also invest in Real Estate Investment Trusts (REITs) traded on the stock exchange.

Cryptocurrency

Cryptocurrency is regulated in Japan, offering a secure environment for this type of investment. Bitcoin, Ethereum, and other cryptocurrencies can provide high returns, but it’s essential to remember the high risk associated with them.

Other Options

If you want to diversify further, consider:

Gold and Precious Metals: A traditional method to preserve wealth.
Art and Collectibles: While less common, these can be highly profitable investments for those familiar with the market.

Investment Strategies That Are Easy to Start

Getting started with investing might seem overwhelming at first, but with a few basic strategies, you can begin with confidence.

Investing is not about gambling or betting all your money at once; it’s about planning and strategy. By following these tips, you’ll be on your way to growing your wealth safely:

Diversify Your Investments: Don’t put all your money into one investment. Combine fixed-income and variable-income assets to reduce risk.
Invest Regularly (Tsumitate NISA): Make small, regular investments while enjoying tax-exempt benefits.
Take a Long-Term Perspective: Instead of trying to “time the market,” focus on using time as your ally in investments.

Platforms and Tools for Investing in Japan

To take your first step in investing in Japan, selecting the right brokerage platform is crucial. Through these platforms, you can buy and sell stocks, ETFs, and explore other investment options.

For beginners, it’s essential to choose a platform that is secure, easy to use, and offers reliable support.

Here are some popular platforms recommended for beginners:

Rakuten Securities: Known for its intuitive interface and a wide range of products.
SBI Securities: Offers competitive fees and diverse services, making it an ideal choice.
Monex Securities: Perfect for those seeking a straightforward and reliable investment experience.

In addition to traditional brokerage firms, practical apps like LINE Securities and PayPay Investment are available in the Japanese market, enabling you to manage investments directly from your smartphone.

Also, pay attention to fees, such as management fees and transaction costs. These may seem small initially but can have a significant impact over time.

Therefore, conduct thorough research beforehand and find the platform that best suits your needs and financial goals.

Understanding Japan’s Investment Tax System

When it comes to taxes, many beginner investors may feel overwhelmed. However, Japan’s tax system is well-structured and offers incentives to encourage investing.

By leveraging specific programs, you can save on taxes and maximize your returns.

Two popular programs are as follows:

NISA (Nippon Individual Savings Account): Tax exemptions are provided on profits up to a certain annual limit.
iDeCo (Individual Defined Contribution Pension Plan): A pension plan with significant tax benefits.

Apart from these programs, note that capital gains and dividends are generally subject to a fixed tax rate of 20.315%.

How to Avoid Common Investment Mistakes

Everyone makes mistakes when starting out with investments, but planning ahead can help you avoid some of the most common pitfalls. Below are common errors and how to steer clear of them:

Expecting Short-Term Results: Investments take time. Don’t expect to get rich overnight.
Ignoring Costs: Fees and taxes can eat into your profits. Always account for these costs.
Lack of Diversification: Putting all your money into one stock or cryptocurrency is highly risky.

Investing may seem complicated at first, but it doesn’t have to be. The most important step is to start, even if it’s with a small amount.

In Japan, tools and incentives like “Tsumitate NISA” and “iDeCo” are readily available to support first-time investors. Remember: in investing, **time** is your greatest ally. The sooner you start, the greater your potential returns.

So why not open a brokerage account today and begin your investment journey? Your future self will thank you!