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Invest in the Nikkei 225
The Nikkei index tracks the performance of 225 major Japanese companies. Here's how to buy Nikkei stocks and ETFs from Canada.
Investors in Canada can broaden their portfolios by investing in the Nikkei — an index that tracks 225 big-name stocks traded on the Tokyo Stock Exchange. But you need a stock trading platform that provides access to international stock exchanges.
What is the Nikkei 225 index?
The Nikkei 225 index — also called the Nikkei Stock Average or simply, the Nikkei — is one of Japan’s leading stock indices. It’s a price-weighted index that tracks 225 blue-chip stocks traded on the Tokyo Stock Exchange across 36 industries.
The index has been calculated since 1950 and is named after the Japan Economic Newspaper, Nihon Keizai Shimbun. It is Asia’s oldest index and is often regarded as the Japanese equivalent to the Dow Jones Industrial Average.
Can I invest in the Nikkei 225 index from Canada?
Yes, you can invest in the Nikkei 225 index from Canada by purchasing exchange traded funds (ETFs) that track the Nikkei 225. That said, to trade most of these ETFs, you’ll need a brokerage account that allows you to buy and sell international securities.
How to invest in the Nikkei 225 index
There are 2 ways to invest in the Nikkei 225. You can purchase individual stocks within the index, or you can purchase an ETF that tracks the index as a whole.
Here’s a quick breakdown of the process:
- Select an investment platform. If you don’t already hold a brokerage account, compare trading platforms to find the brokerage that best meets your needs.
- Open and fund your account. You can typically complete an application online, and fund your account before you start trading.
- Purchase your securities. Use your platform’s research tools or rely on third-party market research to select the stocks or ETFs you’d like to purchase.
- Monitor your investments. Track the performance of your investments from your brokerage account.
What stocks are in the Nikkei 225 index?
The Nikkei tracks stocks available for trade on the Tokyo Stock Exchange. To buy or sell these stocks, sign up for an international trading account with a broker that offers access to global exchanges, like Interactive Brokers.
Among the most popular of the Nikkei’s 225 stocks are:
- Canon Inc. (TYO: 7751.T, NYSE: CAJ)
- Daikin Industries,Ltd. (TYO: 6367.T, OTC Markets: DKILY)
- DENSO Corporation (TYO: 6902.T, OTC Markets: DNZOY)
- Fanuc Corporation (TYO: 6954.T, OTC Markets: FANUY)
- Fast Retailing Co., Ltd. (TYO: 9983.T, OTC Markets: FRCOY)
- Honda Motor Co., Ltd. (TYO: 7267.T, NYSE: HMC)
- Japan Post Holdings Co., Ltd. (TYO: 6178.T, OTC Markets: JPHLF)
- KDDI Corporation (TYO: 9433.T, OTC Markets: KDDIY)
- Toyota Motor Corporation (TYO: 7203.T, NYSE: TM)
- Mitsubishi UFJ Financial Group, Inc. (TYO: 8306.T, NYSE: MUFG)
- Nippon Telegraph and Telephone Corporation (TYO: 9432.T, OTC Markets: NTTYY)
- Nissan Motor Co., Ltd. (TYO: 7201.T, OTC Markets: NSANY)
- Recruit Holdings Co., Ltd. (TYO: 6098.T, OTC Markets: RCRRF)
- SoftBank Group Corp. (TYO: 9984.T, OTC Markets: SFTBY)
- Sony Group Corporation (TYO: 6758.T, NYSE: SONY)
What ETFs track the Nikkei 225 index?
There are several ETFs that track the Nikkei 225, including:
- BlackRock, iShares Core Nikkei 225 ETF (TYO: 1329.T)
- Daiwa Asset Management, Daiwa ETF Nikkei 225 (TYO: 1320.T)
- MAXIS Nikkei 225 ETF (TYO: 1346.T)
- Nomura Asset Management Group, Nikkei 225 Exchange Traded Fund (TYO: 1321.T)
These funds are only available to those with international trading accounts that provide access to ETFs listed on the Tokyo Stock Exchange. Consider the CAD-YEN exchange rates when trading these ETF — TSE/TYO is primarily in yen.
How is the Nikkei 225 performing?
The graph below tracks how the Nikkei 225 has performed over the past year. Figures are stated in Japanese Yen (JP¥).
Why should I invest in the Nikkei 225 index?
One of the biggest draws to investing in index funds like the Nikkei 225 is the opportunity for portfolio diversification. And if you’re seeking Japanese stock market exposure, an ETF offers a conveniently packaged investment opportunity.
While you can invest in individual stocks, ETFs are less volatile and offer more asset diversification. Especially since the Nikkei tracks 225 blue chip stocks across 36 industries.
What are the risks of investing in the Nikkei 225 index?
As is the case for any investment, no stock or ETF is risk-free. If the index performs well, you’ll make a profit. If the index drops, so will your investments.
The Nikkei is one of Japan’s oldest and best-established indices, but it isn’t immune to volatility. For example, the Nikkei fell more than 10% after a record-breaking 9.1 magnitude earthquake shook the country in March 2011. The index has since recovered. But the event demonstrates that even well-established indices can be impacted by outside factors.
Invest in Nikkei stocks and ETFs with an online stock trading account
The Nikkei tracks 225 of the largest and most profitable companies in Japan. While you can’t invest in the index directly, you can use an international brokerage account to invest in ETFs that track the index or that lets you trade stocks included in the index.
Review your brokerage account options across numerous trading platforms to find the broker that best fits your investment goals.
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