Investors 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’ll likely need an international brokerage account before you can buy.
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.
Yes, you can invest in the Nikkei 225 index from the US 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.
There are two 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 Fidelity Investments or Zacks Trade.
Among the most popular of the Nikkei’s 225 stocks are:
- Canon Inc.
- Fast Retailing
- Honda Motor Company
- Japan Post
- Mitsubishi UFJ Financial
- Nippon Telegraph and Telephone
- Nissan Motor Company
- NTT Docomo
- Recruit Holdings
- Sony Corporation
- Toyota Motor
What ETFs track the Nikkei 225 index?
There are several ETFs that track the Nikkei 225, including:
- Blackrock Japan’s iShares Nikkei 225 ETF
- Daiwa Asset Management’s Daiwa ETF Nikkei 225
- Nomura Asset Management’s Nikkei 225 Exchange Traded Fund
But these funds are only available to those with international trading accounts with access to Tokyo Stock Exchange-listed ETFs. Consider the USD exchange rates when trading these ETF — TSE/TYO is primarily in yen.
If you don’t want to open an international trading account or deal with fluctuating exchange rates, there is one US-listed ETF that tracks the Nikkei 225: the MAXIS Nikkei 225 Index ETF. This ETF is dollar-denominated and trades on the New York Stock Exchange.
The graph below tracks how the Nikkei 225 has performed over the past year.
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.
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 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 political and environmental factors.
The Nikkei tracks 225 of the largest and most profitable companies in Japan. While you can’t invest in the index directly, you can invest in ETFs that track the index or trade stocks included in the index with an international brokerage account.
Review your brokerage account options across numerous trading platforms to find the broker that best fits your investment goals.
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