Plenty of foreign residents in Japan open a NISA or iDeCo account and then hit the same wall: what should I actually invest in? If you are wondering how to invest in Japan once the account is set up, this guide is for you.
In this guide, certified financial planner Masamichi Takayanagi explains the features of investment trusts, ETFs, individual stocks, and bonds, and how to think about choosing what suits you. NISA is a tax-free scheme, and iDeCo is a private pension system for building retirement savings — neither is an investment product in itself. This article isn’t about the schemes themselves, but about what you put inside them.
About the Supervisor & Writer
Masamichi Takayanagi
Financial Planner & columnist;
An independent financial planner with extensive experience as a financial columnist, specializing in a wide range of topics including asset management, life insurance, inheritance, loan products, and credit cards. Over 1,000 articles and projects have been contributed to the field.
1st grade Certified Skilled Professional of Financial Planning, Certified Financial Planner®.
Table of Contents
Chapter 1: Before You Start Investing
Before picking a product, get three things straight:
- Do you have an emergency fund?
- What are you investing for?
- How long can you invest, and how much of a drop can you stomach?
For how all of this fits into your household finances, see our fuller guide, Personal Finance in Japan.
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Do You Have an Emergency Fund?
Before you start investing, set aside an emergency fund for sudden expenses or a drop in income. One common rule of thumb is three to six months of living costs, but the right amount shifts depending on whether you have dependents and how stable your income is.
The health insurance that company employees join includes injury and sickness allowance (shobyo teate-kin). Municipal National Health Insurance, by contrast, has no nationwide statutory version of this benefit — so if you are self-employed or freelance, it can make sense to build a thicker cushion against a loss of income.
Without an emergency fund, you may have to sell investments to cover living costs just when the market is down. Keep the money you will use soon separate from the money you invest for the long term.
What Are You Investing For?
Retirement, a home, education costs — your purpose shapes how long you can invest and how much risk you can take.
Money you plan to use within a few years needs careful handling, since the market could be down right when you need it. For long-term wealth building, on the other hand, historical data shows that spreading your investments and keeping them up over a long period tends to smooth out the swings in your returns.
Deciding what the money is for, first, keeps your product choices from drifting.
How Long Can You Invest, and How Much of a Drop Can You Stomach? (Risk Tolerance)
Risk tolerance comes down to your income, savings, investment horizon, and family situation — and also the psychological strain of watching your holdings fall.
If every dip leaves you anxious enough to sell, you may be taking on too much risk. When you are new to investing, one good approach is to start small and see how the ups and downs actually feel to you.
Chapter2 : What You Can Invest In in Japan
When you look at how to invest in Japan, the main options come down to these:
- Investment trusts (mutual funds)
- ETFs (exchange-traded funds)
- Individual stocks
- Bonds
Each works differently and moves differently, so compare them against your goals and your risk tolerance.
Investment Trusts (Mutual Funds)
An investment trust pools money from many investors and invests it in stocks, bonds, and other assets. Many hold a large number of securities in a single fund, which makes it easy to diversify with a small amount.
The main costs are a purchase fee, a trust fee (shintaku hoshu) charged while you hold it, and a trust asset retention charge (shintaku zaisan ryuhogaku) that can apply when you sell. Not every fund charges all of these, so check the prospectus.
As for how they are run, index funds aim to track an index such as the Nikkei 225 or TOPIX, while actively managed funds aim to beat the index. Index funds tend to cost less.
ETFs (Exchange-Traded Funds)
An ETF is an investment trust listed on a stock exchange. Many track an index, and some let you diversify across multiple securities in a single fund.
A regular investment trust trades at a net asset value calculated once a day. An ETF, by contrast, trades at the market price during trading hours, just like a stock. You can also use limit orders and market orders.
Trust fees tend to be lower than those of regular unlisted investment trusts, though trading fees may apply. Note that an ETF does not automatically mean broad diversification — some concentrate on a particular theme or asset.
Individual Stocks
Buying individual stocks means investing directly in a specific company. If the share price rises, you can make a profit on the sale, and if the company pays a dividend, you receive that too.
On the other hand, putting all your money into one company means that firm’s declining performance can weigh heavily on your entire portfolio. And spreading across several companies takes more effort to manage than an investment trust or ETF would.
Japanese stocks are generally traded in units of 100 shares, but some brokerages offer an odd-lot share service (tangen miman kabu) that lets you buy from a single share.
Bonds
A bond is a security issued by a government, company, or other body to raise funds. With a typical bond, you receive interest, and as long as the issuer does not default, the face value is repaid at maturity.
Some bonds move less than stocks, but they are not principal-guaranteed. Beyond the issuer’s credit risk, there is also the relationship whereby a rise in market interest rates pushes down the price of bonds already issued.
By combining assets that move differently from stocks, bonds can help dampen the swings of your overall portfolio.
Chapter3 : How to Choose: Investment Trusts, ETFs, or Individual Stocks
When you are deciding how to invest in Japan, an investment trust or ETF that tracks a broad index can diversify well even with just one or two funds. Individual stocks let you pick companies yourself, but they require company analysis and more hands-on management to stay diversified.
Ratings vary by product, so treat the table as a general guide only.
| Investment Trusts | ETFs | Individual Stocks | |
|---|---|---|---|
|
Ease of diversification |
High |
Medium–High |
Low |
|
Expertise required |
Low |
Medium |
High |
|
Price movement |
Depends on holdings |
Depends on holdings |
Driven heavily by one company |
|
Suited to beginners |
High |
Medium |
Low |
|
Main fees |
Trust fee, etc. |
Trust fee, trading fees, etc. |
Trading fees, etc. |
Chapter4 : Core and Satellite: Balancing Individual Stocks with Long-Term Investing
Even as a financial planner, I was absorbed in individual stocks when I first started investing.
Analyzing companies and predicting their growth was genuinely fun, and the thrill when a share price rose just as I had expected is something only individual stocks can give you. But it also meant that whenever the market was open, I was preoccupied with prices, and every time news broke I would go and check how it might affect the companies I held.
There is nothing wrong with investing in individual stocks in itself. But I came to feel that keeping it up alongside a full-time job takes not just knowledge, but time and mental energy too.
So what I adopted was an approach that leaves the “core” — the foundation of my assets — to investment trusts and ETFs that spread across a wide range of regions and companies. Even when a particular company or country does badly, it is harder for that to hit my whole portfolio at once.
After switching to this approach, I spent less time watching the daily ups and downs, and found it easier to focus on my work and on time with my family.
For foreign residents in Japan, there are things to weigh beyond investing itself — whether you will settle in Japan or return home, how to think about the yen versus your home currency, and so on. That is exactly why it is worth building a system that doesn’t take too much to manage.
If there is a particular company you want to invest in, one option is to use individual stocks as a “satellite,” within a range that won’t affect your daily life.
Diversification is the idea of not letting a drop in any single asset or market hit your whole portfolio at once.
There are three main ways to do it:
- Spread across assets: divide between stocks, bonds, cash savings, and so on.
- Spread across markets: reach beyond Japan into several countries and regions.
- Spread across time: stagger when you buy.
With overseas assets, keep an eye on exchange rates too. For products without currency hedging, a stronger yen generally pushes down the value of your assets in yen terms, while a weaker yen pushes it up.
That said, diversification does not guarantee your principal.
Chapter6 : How Much Should You Invest?
As a rule, invest only money you have no plans to use in the near future — and only after you have secured your emergency fund.
Money earmarked for the next few years, such as housing or education costs, needs careful handling, since you may need it just when the market is down.
Investing a set amount each month staggers your purchase timing, but regular contributions do not always earn more than investing a lump sum. Think about an amount you can keep up comfortably, viewed across your whole household budget — income, spending, savings, insurance, and retirement funds included.
Chapter7 : What About NISA?
NISA is not an investment product. It is a scheme that makes the profits from eligible products tax-free, up to certain limits.
You can invest in investment trusts, ETFs, listed stocks, and more, though the eligible products differ between the Tsumitate (accumulation) quota and the Growth quota. For how the scheme works and how to choose a financial institution, see these articles:
Chapter8 : What About iDeCo?
iDeCo is a private pension system for building retirement savings with tax advantages.
You choose where to invest from a lineup prepared by the plan’s administrator — investment trusts, fixed-term deposits, insurance products, and the like. Unlike NISA, it is not a system for freely buying and selling individual stocks or ETFs, and as a rule you cannot withdraw your assets freely until the age when you can start receiving old-age benefits.
For the details of eligibility and tax advantages, see this article:
Chapter9 : Simple Steps to Get Started
When you are starting out, working through things in this order makes them easier to sort out:
- Check your emergency fund.
- Decide what you are investing for.
- Decide on an amount you can keep up.
- Think about the level of risk you can accept.
- Choose the type — investment trust, ETF, individual stock, bond, and so on.
- Think about spreading across assets, markets, and purchase timing.
- Review your goals and any changes in your finances regularly.
The key is to narrow things down in this order, rather than starting from a particular product.
When you open a brokerage account, you will need to provide your My Number, and foreign nationals may be asked for identity documents such as a residence card. Check which documents are required with each brokerage.
Chapter9 : Simple Steps to Get Started
Here are common questions on how to invest in Japan once your NISA or iDeCo account is open.
Q1: If I open a NISA or iDeCo account, does that mean I’ve started investing?
NISA and iDeCo are not investment products in themselves. With NISA, you choose from investment trusts, ETFs, listed stocks, and the like; with iDeCo, you choose from investment trusts, principal-protected products, and others prepared by your financial institution.
Q2: What’s the difference between an investment trust and an ETF?
Both come in diversified forms, but they are bought and sold differently. A regular investment trust trades at its net asset value, while an ETF trades at the market price during trading hours.
Q3: What should a beginner start with?
First, secure your emergency fund and decide what you are investing for and over what period. From there, one approach is to start with an amount you can keep up comfortably and look at products that are easy to diversify with.
Q4: How little can I start with?
As a rule, start with an amount you can keep up, within money you won’t need in the near future. What matters is less the size of the amount than whether you can keep it going without straining your budget.
Q5: Is it OK to invest only in Japanese stocks and funds?
Investing only in Japan is not wrong in itself. But to avoid concentrating in one country or market, there is a case for spreading across several regions.
Q6: What happens to my investments if I return home?
If you leave Japan and become a non-resident, the treatment of your brokerage account and NISA can change. Since it depends on your financial institution and your reason for leaving, check the details in our guide on leaving Japan and with the institution you use.
Chapter10 : In Closing
Knowing how to invest in Japan starts not with a product, but with getting clear on your emergency fund, your goals, your time horizon, and your risk tolerance.
Investment trusts and ETFs are easy to diversify with, while individual stocks let you pick companies directly but carry concentration risk. Bonds included, understand what each one offers and combine them accordingly.
NISA and iDeCo are not investment products but schemes that support building your assets. Rather than starting from a particular product name, work through the seven steps, make your decisions in that order, and build something you can keep up comfortably.
*This article is for general information only and is not individual financial or tax advice. Information is accurate as of October 2026, but tax rules and brokerage policies change regularly. Terms and eligibility also depend on the brokerage, the product, and your own situation, so always check the latest details with your brokerage, the tax authorities, or a tax professional before making a decision.
