Introduction
When you look into starting NISA, you first encounter the phrase, ‘Beginners should start with mutual funds.’ On the other hand, stories of people who have increased their wealth through individual stocks also circulate on social media. Mutual funds alone feel a bit underwhelming. But individual stocks are scary. I think there are many people who have opened an account but are stuck because they don’t know which one to start with.
My name is Kazuki. I am an individual investor who has been investing for about five years. I started with mutual funds. After that, I began buying individual stocks, and I lost 1 million yen by continuing to add to my position in a US stock called CHPT. When I bought CHPT, I hadn’t decided on a selling price or a stop-loss line.
That is why in this note, I will not say that ‘mutual funds are the correct answer’ or ‘individual stocks are the correct answer.’ When I looked into it, many of the popular posts did not put down either side. What stood out were stories of people who tried both and then decided to re-adjust their allocation later.
I will write the conclusion first. What is important is not the order of ‘which one to start with,’ but dividing the boxes where you put your money first. If you divide the boxes and set a limit for the individual stock box, you can do both mutual funds and individual stocks.
I have made sure that when you finish reading, the following four things will remain in your hands.
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A table summarizing the differences between mutual funds and individual stocks on one page
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How to calculate dividing your money into three boxes
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The process of how the individual stock box grows without you knowing and how to stop it
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Questions to check if you are ready to buy your first individual stock
I will tell you in advance that no matter which one you choose, you will suffer a loss if the stock price falls. What I can provide in this article is a way to divide your money so that your losses do not become too large.
Chapter 1: What is the difference between mutual funds and individual stocks?
What you will learn in this chapter: An overview comparing the two differences in terms of amount, allocation, effort, and price movement
Mutual funds are an ‘assortment,’ individual stocks are ‘one company’
A mutual fund is a product that bundles the stocks of many companies together. Investment professionals take the money collected and invest it by dividing it among hundreds of companies. People who buy them are essentially buying that assortment little by little.
Individual stocks mean choosing one company and buying that company’s stock yourself. Which company to buy and when. When to sell. You decide everything yourself.
Summarizing the differences on one page
Based on CREX’s comparison article and the Financial Services Agency’s explanation of NISA, I have created a table of the differences.
The three most important things in the table
First is the amount you can start with. According to the CREX article, many online securities companies allow you to start a savings plan from 1,000 yen per month. Some places even allow it from 100 yen. Individual stocks are mostly bought and sold in units of 100 shares. If a company’s stock price is 3,000 yen, 100 shares would be 300,000 yen. However, recently, many online securities companies have provided mechanisms to buy from a single share. I will write about this in Chapter 6.
Next is how they are divided. When you buy just one investment trust, the contents are already split among many companies. A CREX article provided an example where if you put the same amount of money into 100 companies, the impact of one company going bankrupt would only be about 1%. If you buy only one individual stock, the result of that single company becomes your result directly.
Finally, there is the price movement. The price of an investment trust is called the net asset value, and it is determined only once a day in the evening. The price of an individual stock moves throughout the entire trading session, and there are days when it moves more than 10% in a single day. Because the numbers change every time you open the screen, it is easier for your emotions to be swayed by individual stocks.
In NISA, the quotas are already divided
According to the Financial Services Agency’s explanation, NISA has two types: the ‘Tsumitate Investment Quota’ and the ‘Growth Investment Quota.’ The amount that can be invested in a year is up to 1.2 million yen for the Tsumitate Investment Quota. The Growth Investment Quota is up to 2.4 million yen. The upper limit for the total amount you can hold is 18 million yen combined, of which up to 12 million yen can be held in the Growth Investment Quota.
You can only buy individual stocks in the Growth Investment Quota. What you can buy in the Tsumitate Investment Quota is limited to designated investment trusts and the like. In other words, the containers for investment trusts and individual stocks are already separated on the side of the NISA system itself. This division will be used as is in Chapter 3.
Chapter 2: The Reasons Why People Say ‘Beginners Should Start with Investment Trusts’ and the Reasons Why People Want to Try Individual Stocks
What you will learn in this chapter: The arguments for both sides and the fact that there is truth in both
Three reasons why people say to start with investment trusts
Many of the articles I researched wrote that ‘beginners should start with investment trusts.’ The reasons given are almost the same.
The first is that you can start with a small amount of money. Hiromi Urimoto, a financial planner at Rakuten Securities’ Toshiru, writes that investment trusts can often be bought from 10,000 yen. The same article also stated that if you want to buy individual stocks, you would want at least 500,000 yen in capital. This is so you don’t narrow down the companies you can choose from.
Another reason is that they are already diversified from the start. It becomes less likely that the majority of your money will be lost due to bad news from a single company.
And it requires less effort. Since you can leave the decision of which companies to buy to the experts, you can start even if you cannot read financial statements. Urimoto compared individual stocks to ‘driving on public roads just after getting your license.’
Even for professionals, it is difficult to consistently beat the market average
There is one more story that comes up often. S&P Dow Jones Indices compares investment trusts managed by professionals who select companies with the price movements of the entire market every year. The number representing the price movement of the entire market is called an index. In the tally at the end of 2025, the results were the same even for investment trusts that invest in large Japanese companies. It was introduced that when looking at a long period of 10 or 15 years, over 80% of them underperformed the index.
A person on YouTube who had been doing individual stocks for four years also said that they stopped doing individual stocks after seeing this type of data. The line of thinking is that if it is difficult even for people who research it every day for work, it is even more difficult for me.
There are also reasons why people want to try individual stocks
However, the same poster also said, ‘I don’t want to deny individual stocks.’ They said that researching companies and industries was a good learning experience.
Individual stocks offer things that are hard to get with investment trusts. When you read the financial results of a company you chose yourself, the way you see the news changes. Your eye for looking at a company as a shareholder develops. Some people start with the feeling of ‘wanting to support a company I know.’
Therefore, there is truth in both ‘investment trusts are enough’ and ‘I want to try individual stocks.’ The problem is not which one to choose, but how you put your money in.
What people who did both changed later
There was a common thread among the popular videos on YouTube. People who did both investment trusts and individual stocks changed their ratios based on time and feelings rather than performance.
In one video, a person who only used investment trusts and someone who did both but was down 5% on individual stocks were discussing their experiences. The person doing both said, ‘Individual stocks take up 10 hours of my time each month.’ Another person said, ‘I reduced my ratio of individual stocks because I end up checking them every day.’
In the videos I watched, people who quit individual stocks or reduced their ratio stood out. Conversely, there are also people who stopped investment trusts and moved to individual stocks. In either direction, they were re-deciding their ratios after they had already started. If you decide on the ratio before you start, you can reduce the number of times you have to scramble to re-decide later.
Chapter 3: Not ‘Which One First,’ but ‘Which Box to Put It In’
What you will learn in this chapter: A structure for holding both investment trusts and individual stocks using three boxes
Reviewing the three boxes
In the featured article ‘What Stock Beginners Should Do in Their First Year,’ I wrote about dividing money into three boxes. I will write it again here.
We will apply investment trusts and individual stocks to these three boxes. You buy investment trusts with the money for accumulation. You buy individual stocks with the money for individual stocks. You leave the money you don’t use in the bank.
Aligning the boxes with NISA quotas
If you align the NISA quotas seen in Chapter 1 with the three boxes, it looks like this.
If you align the NISA quotas with the boxes, you can understand the contents of the boxes just by looking at how much is in each quota. You can buy investment trusts in the growth investment quota as well, but it is easier to see if you keep them separate at first.
The answer to ‘Which one first’
When you use this structure, the question ‘Investment trusts or individual stocks, which should I start with?’ changes slightly.
The box for accumulation money can be started from the month you open your account. You just need to set it up to buy investment trusts with a fixed amount on a fixed day every month. You start using the box for individual stock money after you have set a limit and are able to write down the three things you need to decide before buying.
If you were to prioritize them, investment trusts come first. However, there is no need to give up on individual stocks. You should prepare the individual stock box from the beginning. You just wait to put the contents in until you are ready.
I also started with investment trusts. However, when I bought individual stocks after that, I hadn’t set a limit for the individual stock box. Money can flow endlessly into a box without a limit. I will write about that in Chapter 5.
Chapter 4: Setting a limit for the individual stock box
What you will learn in this chapter: The procedure for calculating the amounts for the three boxes using your own numbers
The guideline for the ratio is often said to be 10% to 30%
An investment style that centers on investment trusts and uses individual stocks for a portion is called core-satellite. ‘Core’ means the center, and ‘satellite’ means a moon orbiting around it.
The suggested percentages varied slightly depending on the article. CREX sets the core at 70-90% and the periphery at 10-30%. Investment Concierge set the periphery at 10-40%. In the featured article, I used the 80/20 split introduced by Nomura Asset Management as a starting point.
None of these are officially set figures; they are just guidelines for how to think about it. In this article, we will also use 80% for accumulation and 20% for individual stocks as a starting point.
Before the percentage, ask: ‘Would I be in trouble if it halved?’
There is something more important than the percentage. It is whether your life or your peace of mind would change if the money in individual stocks were cut in half. In the featured article, I introduced this as Tomoya Okamura’s way of thinking.
The same point was made on YouTube. The idea is that individual stocks should be an amount that won’t affect your life even if it disappears. The suggested percentage is just a starting point, and in the end, you decide based on an ‘amount that wouldn’t cause trouble if it halved’.
Calculation Steps
There are three steps.
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Set aside money you won’t use first (use 6 months of living expenses as a guideline).
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Divide the remainder into accumulation money and individual stock money at an 8:2 ratio.
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Imagine a scenario where the individual stock money is halved, and if that would cause trouble, lower the amount.
Calculation Example (Hypothetical Figures)
The numbers are hypothetical for explanation purposes and are not examples of real people. I will use the same example as in the featured article.
Suppose a person has 1.5 million yen in savings and monthly living expenses of 200,000 yen.
If a loss of 30,000 yen wouldn’t change your life, then the upper limit for individual stock money is 60,000 yen. If you feel like you ‘wouldn’t be able to sleep if it dropped by 30,000 yen,’ lower the limit to 40,000 or 20,000 yen. If the limit is small, the loss will be small if things don’t go as planned.
Write the limit as the ‘amount invested’
Once you have decided on the limit, write it down in your investment notebook. One line saying ‘Individual stock money: 60,000 yen limit’ is enough.
There is one thing to decide here. The limit should be counted by the amount you put in, not the current price of the stock. If a stock you bought for 60,000 yen drops to 40,000 yen, the amount you put in remains 60,000 yen. Do not think, ‘Since it’s 40,000 yen now, I can put in another 20,000 yen.’ This rule will be important in the next chapter.
Chapter 5: The Individual Stock Box Grows Without You Noticing
What you will learn in this chapter: The process of how the ratio gets out of balance and rules to stop it.
Intending for 10%, it becomes 50%
One of the popular videos on YouTube argued that a portfolio centered on investment trusts is actually ‘dangerous for beginners.’ The reason is that the individual stock portion can grow larger than you realize.
Even if you initially intended for individual stocks to make up only 10%, you might find they have grown to half your portfolio before you know it. Individual stocks have high volatility, so on days when they go up, you feel happy, and on days when they go down, you want to recoup your losses. Both feelings work in the direction of adding more money to individual stocks.
This trend is also somewhat visible in the numbers. According to a Money Forward article based on research by the Japan Securities Dealers Association, stocks accounted for 59% of the amount purchased through the growth investment quota between January and February 2024. Investment trusts accounted for 41%. This means that even in the early stages, more money was flowing into stocks within the growth investment quota.
What happens when you cross the boxes? (These are hypothetical figures)
Let’s look at what happens when you cross the boxes using the example from Chapter 4. The numbers are hypothetical for illustrative purposes.
Suppose you bought stocks with 60,000 yen of individual stock money, and they dropped to 40,000 yen. Thinking, ‘I can recoup this if they go back up,’ you moved 60,000 yen from your savings money to buy more of the same stock.
At the point when the value dropped, the proportion of individual stocks had decreased to about 14%. Looking only at the numbers, it is a situation where it feels easy to ‘add more.’ However, after buying more, the amount invested became 120,000 yen, which is twice the original limit. The proportion has also risen to about 36%.
If the stock price drops by half again from here, the current value of the individual stocks is 50,000 yen. Against the 120,000 yen invested, the loss is 70,000 yen. If you hadn’t bought more, the 40,000 yen would have just halved to 20,000 yen, and the loss would have been limited to 40,000 yen.
My CHPT was also a box without a limit
When I lost 1 million yen on CHPT, it was the same pattern. In September and October 2023, I bought more every time the stock price fell. The fact that the price went down became the reason to buy. Because I hadn’t set a limit for the individual stock box, I hadn’t decided where to stop either.
If I had decided at the beginning, ‘This is the limit for individual stock money,’ and stuck to it, there is a possibility that the additional purchases would have stopped at the limit. There is a possibility that the loss could have been kept much smaller.
Three rules to make you stop
To keep the individual stock box from growing, I write the following three things in my investment notebook.
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Individual stock money is up to the limit. Count by the amount invested.
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Do not move money from savings or unused money into the individual stock box.
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Even if you want to change the limit, do not change it that day. Decide on a monthly review day.
The third point is a rule to prevent you from making decisions on days when your emotions are stirred. This is because the thought on a down day that ‘I can buy more if I raise the limit’ easily becomes a justification for buying more. If you set the review day to be the same as your monthly savings day, it will be harder to forget.
Don’t add more when it goes up, either
The box doesn’t just grow when prices fall. When individual stocks go up, the proportion naturally increases. You will want to add money from outside the limit while still feeling the success of the investment.
If the proportion has only increased because the price went up, there is no need to rush to sell. However, do not add money from outside the limit. The day you feel like adding more, make it a day to check if the price has reached your selling target. The selling price should be written in the second of the three things you decide before buying.
Chapter 6: Before Buying Your First Individual Stock
What you will learn in this chapter: Questions to verify if you are ready to start using the individual stock box
You can try it with just one share
Some of you may think, ‘Individual stocks are out of reach because 100 shares cost hundreds of thousands of yen.’ Many online brokerages now offer systems that allow you to buy from a single share. Examples include SBI Securities’ ‘S-Kabu,’ Rakuten Securities’ ‘Kabu-Mini,’ and Monex Securities’ ‘One-Kabu.’ The number of companies handled and the types of orders available vary by brokerage firm.
With one share, you can buy at the price of that single share. If it is a company with a stock price of 3,000 yen as mentioned in Chapter 1, you can try it for 3,000 yen instead of 300,000 yen for 100 shares. Even if your budget limit for individual stocks is 60,000 yen, you can still gain experience with individual stocks within that limit. When buying from one share, the order types and timing may differ from regular stocks, so please check your brokerage’s instructions before using them.
Can you write down three things to decide before buying?
Even with just one share, the things you need to decide before buying are the same.
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Reason for buying: Why are you buying that company?
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Selling price: At what price will you sell?
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Stop-loss line: At what price will you sell if it drops?
If you cannot write down even one of these three things, it is not yet time to use the individual stock box. It is perfectly fine to continue only with the investment trust accumulation box. While you continue your investment trust accumulation, you can still practice reading the financial results of companies you are interested in and writing down those three things.
When I bought CHPT, all I had was a reason for buying. I had not decided on a selling price or a stop-loss line.
Guidelines for keeping the individual stock box small
I have turned the common burdens of individual stocks, which I found in articles and stories from people on YouTube who have done both, into questions. The more of these that apply to you, the easier it will be to continue if you keep your individual stock box on the smaller side.
For those who find the first point concerning, there is an article titled ‘I end up checking stock prices many times a day.’ I wrote about a method for deciding in advance when to check.
With your first share, look at your own actions rather than the results
What I want you to look at with your first share is not whether you made a profit, but your own actions. What did you do on a day when the price dropped? Were you able to sell at the stop-loss line you decided on? Did you feel the urge to add money from outside your budget limit?
A person on YouTube who has been doing individual stocks for four years said that even though they were making a profit, about half of their stocks remained at an unrealized loss because they couldn’t cut their losses. Even if your performance is positive, there are times when you haven’t followed what you decided. If you write down your feelings for the day along with the date you bought or sold in an investment notebook, you will be able to see your own actions later.
Chapter 7: What to do today
What you will learn in this chapter: The order in which to take action after reading this article
The 4 things to do today
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Decide on the money you won’t use. Calculate this based on 6 months of living expenses.
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Divide the remainder into money for accumulation and money for individual stocks. Start with an 80/20 split.
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Imagine a scenario where the money for individual stocks is cut in half, and set a limit. Write it in one line in your investment notebook.
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Using the money for accumulation, set up an investment trust savings plan within your NISA investment quota.
For the individual stock box, writing down the limit today is enough. You can start putting money into it once you find a company for which you can write down the three things you decide before buying.
Example of what to write in your investment notebook
Common doubts
Q. Is it okay to just use investment trusts and never do individual stocks?
Yes, it is. You can also decide to set the individual stock box to 0 yen. The article explaining core-satellite investing also mentions the idea that those who don’t have time can just focus on the core part. You can start using the individual stock box whenever you feel like it.
Q. Is it bad to start with individual stocks?
It is not bad. In that case, too, please first set aside the money you won’t use and set a limit for the individual stock money. If you start with one share within that limit, the money you put in will not exceed the limit.
Q. When should I review the limit?
Decide on a monthly review day. Do not change it on days when stock prices move significantly. If your income or living expenses change, recalculate based on the money you won’t use.
Conclusion
There is no ‘correct’ answer between investment trusts and individual stocks. Investment trusts can be started with small amounts. They are already diversified from the start, requiring less effort. Individual stocks help you develop an eye for evaluating companies. However, they have high price volatility, and the contents of the box can easily grow larger than you realize.
Therefore, divide the boxes before deciding on the order. Start an investment trust with the accumulation money and write down a limit for the individual stock money. For individual stocks, start trying them one share at a time within the limit only after you can write down the three things you decide before buying.
I started with investment trusts and lost 1 million yen on individual stocks without a limit. Dividing the boxes and writing down a limit is something you can do starting today, even if you don’t have the skill to pick stocks.
Just one thing to do today: Open your investment notebook and write one line: ‘Individual stock money: Limit ◯ yen’.
Instructions on how to create the three boxes, set the limit for individual stock money, and write the three things to decide before buying are summarized here.
※ This article does not recommend buying or selling specific stocks or investment trusts. It does not promise profits or guarantee that you will not incur losses. NISA rules and brokerage services are subject to change. Please make investment decisions based on your own verification.
Thank you for reading until the end!!
Reference Materials
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Financial Services Agency, NISA Special Website ‘New NISA’ (Verified October 18, 2026)
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CREX ‘What are Investment Trusts? Comparing Differences with Stocks Across 7 Items’
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CREX Explanation of ‘Core-Satellite Strategy’
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Rakuten Securities Toshiru (Article by Hiromi Kurimoto, Differences Between Investment Trusts and Stock Investment)
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Investment Concierge ‘Guidelines for Core-Satellite Ratios’
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S&P Dow Jones Indices ‘SPIVA Japan Scorecard Year-End 2025 Edition’
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Money Forward (Article on 2024 Growth Investment Quota Purchase Status Based on Japan Securities Dealers Association Survey)
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Comparison Article on Fractional Shares (S-Stock, Kabu-Mini, One-Stock) (Diamond ZAi, Stock Basics)
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YouTube ‘Index +21%, Individual Stocks -5%, The Weight of Time Costs Realized After Doing Both’ (May 2026)
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YouTube ‘[Don’t Do Individual Stocks] The Reason I Returned to the S&P 500 Even After Making Profits for 4 Years’ (September 2026)
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YouTube ‘[90% Fail] The Reason Why You Get Stuck Doing a Core-Satellite Strategy with the New NISA’ (May 2026)