Invest in the Land of the Rising Sun: Japan

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Japan is by no means an investor’s paradise. Over the last 15 years Nikkei Stock Index has underperformed its rival indexes in the developed world. For an investor to dismiss it would be pure folly however. There is just too much good stuff in Japan to ignore it.

One way to invest in Japan is buy a Japan focused mutual fund. There are dozens to choose from both with loads and without loads. Some Japan focused funds are very good. I however shy away from such fund by virtue of their cost. Even if a fund is a “no load” fund, internal costs of 1%-2% will eat into any returns.

An option I like a bit better is to invest in Japanese stocks directly. There are many fine companies that are good bets for the future. The Japanese know how to make a good product and increasingly they are doing business with the fastest emerging economy in the world, China. This is a potent mix over the long term.

Stocks though are subject to all the risks we are all so familiar with. Companies can have poor management. Business models can fall by the wayside. As such your position can get hammered.

I prefer to invest in Japan focused ETFs, or exchange traded funds. My favorite is the Ishares MCSI Japan ETF, EWJ which seeks to match the performance of the Nikkei Stock Exchange. It is the best way for the average investor to bet on Japan one way or another.

ETFs are very low in cost. Typically the internal fees of exchange traded funds are near zero. Also, one need not worry about paying a broker a large load. The only commission you will pay your broker is the relatively small one you incur when you buy or sell. If you do business with a discount broker the cost of such moves is also close to nothing.

Japan is a country that has wonderful industry, an educated and disciplined workforce and lay in between America and China. These factors make Japan a compelling investment case.


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