Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you’d like to add some Japanese stocks to your portfolio, the iShares MSCI Japan Index ETF (NYSEARCA: EWJ) could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously.
ETFs often sport lower expense ratios than their mutual fund cousins. The iShares ETF’s expense ratio — its annual fee — is a relatively low 0.53 %, and it yields nearly 2%.
This ETF has not performed well, as Japan’s economy has long been struggling. It didn’t beat the MSCI EAFE index over the past three, five, and 10 years. Still, it’s the future that matters more than the past, and investors with conviction need to wait for their holdings to deliver.
With a low turnover rate of 3%, this fund isn’t frantically and frequently rejiggering its holdings, as many funds do.
It’s good to diversify your portfolio geographically, and Japan’s fortunes may be turning around, in part due to its new, aggressive prime minister. The Nikkei has been rising, and the yen has dropped recently.
More than a handful of Japan-based companies had strong performances over the past year. Mizuho Financial Group Inc. (ADR) (NYSE:MFG) , for example, surged 31%, and recently yielded a solid 3.2%. Japan’s second-largest lender’s latest earnings report featured earnings up more than tenfold, due to a surging stock market boosting the value of its equity holdings. Lending profits were up 6% over year-earlier levels.
Nomura Holdings, Inc. (ADR) (NYSE:NMR) , one of the largest banks in the world, gained 25%, despite losing its CEO and COO last year due to an insider-trading scandal. The company recently posted earnings that were a bit disappointing but still up 13%, and it has high expectations for its investment-banking business in 2013.