Borrowing to buy a monthly-distribution fund — and the transfer is still done on paper

I borrow on a Nomura Web Loan and buy a monthly-distribution mutual fund with the money.

First things first: this is a record, not a recommendation. I am not a financial professional. What follows is what I do and what I learned doing it. If you are considering the same, the judgement is yours.

And the thing I most want to write about is not the yield. It is that moving a holding between two brokerages is, in 2026, still done on paper.

What a Nomura Web Loan is

The mechanics, following the official description.

• The lender is not Nomura Securities but Nomura Trust and Banking
• Eligible collateral: stocks, investment trusts and fund wraps held at Nomura Securities. Foreign investment trusts and securities inside a NISA account are excluded
• Loan-to-value: 50–80% of market value, depending on the type of security
• Amount: ¥100,000 to ¥500 million, in ¥10,000 units (certain domestic stocks are capped at ¥50 million)
• Rate: 2.40% a year, applied from 15 July 2026, variable
• Restricted uses: business funding, newly issued shares, SMA and wrap trust contracts, and insurance products
• Repayment: partial repayment at any time, from ¥1, or repay in full. There is no monthly repayment obligation
• Interest is capitalised into the principal at each six-monthly contract renewal

The absence of a monthly repayment obligation is what gives this product its character. The six-monthly capitalisation is the other half of that, and it is easy to overlook: unpaid interest joins the principal and starts earning interest itself.

The actual work: buy at SBI, move it to Nomura

Now the practical part.

To pledge a fund it has to sit in the Nomura account. The straightforward thing would be to buy it at Nomura. I do not, because the front-end load differs by distributor — online brokerages sell the fund no-load, and a face-to-face brokerage may charge.

So I buy at SBI Securities and transfer the holding to Nomura Securities.

The transfer is still paper

And this is the genuinely tiresome part.

Transferring a mutual trust does not complete online. You request a form, fill it in by hand, and post it.

You also have to write in the number of units yourself.

Unit counts run to awkward numbers of digits, set against the NAV. You copy that off the screen and write it out by hand — transcribing onto paper a figure the brokerage displays in one click.

I do find myself thinking: this, in this decade. The assets are managed digitally, balances and executions are all on screen, and then for the single moment of moving them to another firm, everything reverts to paper and the post.

There is a fee, too. At SBI Securities the transfer-out charge is ¥3,300 including tax per fund. Transferring stocks out, for comparison, is free — investment trusts alone carry this treatment.

Even so, the trouble and the ¥3,300 come to less than paying the front-end load. So every time, I write out the paper.

Add the costs and it clears 4% a year

Run this on instinct and you will miss it, so it is worth doing the addition.

• Borrowing rate: 2.40% a year, variable
• Management fee: depends on the fund, but monthly-distribution funds of this kind run around 1.7% a year
• Total: a little over 4% a year

The portion bought with borrowed money only starts moving forward above that line.

The rate has risen in steps

When I started doing this the rate was 1.90% a year. It is now 2.40%.

• to February 2025: 1.65% a year
• from March 2025: 1.90% a year
• from 16 March 2026: 2.15% a year
• from 15 July 2026: 2.40% a year (current)

That is 0.75 of a point across three revisions. Measured from 1.65%, the interest burden is about 1.45 times what it was.

Where it bites is the cost total. Taking the management fee at around 1.7%, the yield I need has moved from the mid-3% range to the low-4% range. Half a point looks small; the larger the borrowing, the larger it is in absolute terms.

Being a variable rate, it will keep moving. You are not locked in at the rate you started with — obvious, and easy to forget once the loan is simply sitting there. Check the rate in force periodically.

What you should know

I use this method to the hilt — I borrow what I can borrow. Which is exactly why the risk side needs to be written accurately.

• Forced sale on a collateral shortfall. If the collateral valuation falls below 70% of the loan, among other triggers, the pledged securities are sold and applied to repayment. That means being sold out, in a falling market, independently of your own intention
• A distribution is not necessarily income. Distributions from a monthly-distribution fund can include a return of principal rather than investment gains. “Money arrives every month” and “I am making money” are separate statements
• The rate is variable. 2.40% today is not fixed. If it rises, the return you need rises with it
• Interest compounds. It is folded into the principal at each six-monthly renewal
• Some things are excluded. Foreign investment trusts and securities inside a NISA account cannot be pledged
• This is leverage. Buying with borrowed money widens the swing in both directions

What I am weighing now: whether to continue

Honestly, I am undecided.

At 1.90% there was plain advantage in it. At 2.40% I cannot hold the same view. The interest burden is 1.26 times what it was, and with the management fee the total is over 4% a year. The method did not change; the premises moved.

What has started to interest me is margin trading.

Why it was not margin trading until now

The reason is clear enough: you cannot buy a mutual fund on margin. Margin trading covers listed instruments, and mutual funds are not listed. As long as I wanted to hold a monthly-distribution mutual fund, a securities-backed loan was the only route. I chose this because there was nothing to choose between.

ETFs, though, can be bought on margin — and the range of them, including distribution-paying types, has widened a good deal. Once “it has to be a mutual fund” stops being true, the question changes.

The structures, side by side

Which is better depends on the market, the instrument and the tax treatment, so I will not assert one. But the structural differences are worth setting out.

• What you can buy: a securities-backed loan works for both mutual funds and ETFs. Margin trading covers ETFs, not mutual funds
• Term: the Nomura Web Loan has no term and no monthly repayment obligation. Standardised margin trading runs to a six-month limit; negotiable margin trading can be open-ended
• Collateral ratio: the Web Loan takes 50–80% of market value. Substitute securities in margin trading are typically around 80%
• Forced-close trigger: for the Web Loan, collateral valuation below 70% of the loan, among other triggers. For margin, a maintenance-margin breach brings a margin call
• Distributions and dividends: this is the biggest difference. With the Web Loan you hold the security outright, so distributions come to you as they are. A margin position is not an outright holding, so it is adjusted through a dividend-equivalent payment instead

That last point is not ignorable if receiving money monthly is the centre of the design. In my case that was precisely the point, so switching over is not a simple swap.

There is no conclusion

So: no conclusion, for now.

What I do know is that you must not build on the assumption that the conditions you started with will hold. The rate went from 1.65% to 2.40%. It may come down; it may go higher. The ETF line-up keeps changing too.

Rather than deciding a method and leaving it alone: when the premises move, redo the arithmetic. Looking the rate up again this time, I realised I had not been doing that. This piece is a record of that, as much as anything.

The fund itself is covered in more detail in twelve years, and the NAV is flat.

This is a personal record and my own thinking, not investment advice and not a recommendation of any particular method. Rates, fees and terms change; figures are those published at the time of writing. Investment decisions are your own responsibility.