ETF Talk: Profit from Japan’s ‘Abenomics’

Since Shinzo Abe came to power as the prime minister of Japan late in 2012, the Japanese economy has rebounded due to his inflationary policies that have been described as “Abenomics.” The main thrust of his plan is aimed at weakening the yen against rival foreign currencies to spur growth inside of the island nation. You can tap Japan’s growth by investing in the WisdomTree Japan Hedged Equity (DXJ).

In fact, my confidence in this fund is so high that I recently recommended it to subscribers of my Successful Investing newsletter.

This non-diversified exchange-traded fund (ETF) seeks investment results which, before fees and expenses, match an index that is designed to provide exposure to Japanese equity markets, while neutralizing exposure to fluctuations of the yen relative to the U.S. dollar.

Prime Minister Abe’s policies have proven effective in stimulating Japan’s economy since he assumed office last December, with DXJ soaring an incredible 27.90% this year alone. This ETF also offers a dividend yield of 1.29% for investors interested in additional income. While growth in DXJ has slowed lately along with that of Japan due to the yen-to-dollar ratio hovering near 100, DXJ and Japan still have room to rise as the nation’s economy makes further progress.

DXJ-070313

Due to the diversity of the Japanese economy, DXJ invests in a wide variety of sectors: industrials, 29.63%; consumer cyclical, 19.01%; healthcare, 14.05%; basic materials, 11.97%; technology, 10.58%; consumer defensive, 7.51; and financial services, 7.26%. In terms of individually held companies, 36.67% of this fund’s total assets are invested in its top ten holdings.

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Since the ETF focuses on Japan, most of its top ten holdings are traded on Asian markets rather than American ones. However, several names are recognizable companies in the United States, including Canon and carmakers Honda, Toyota and Nissan. The top five companies, in terms of the percentage of assets held, are Mitsubishi UFJ Financial Group, 5.83%; Takeda Pharmaceutical Co., 5.47%; Canon Inc., 4.56%; Honda Motor Co, 3.98%; and Japan Tobacco Inc., 3.15%.

Since all of DXJ’s holdings are in stocks, this ETF should continue to do well as the Japanese economy experiences further growth as a result of “Abenomics.” The sun is rising upon Japan once again. If you invest in DXJ, your profits could rise along with the nation’s resurgent economy.

If you want my advice about buying and selling specific ETFs, including appropriate stop losses, please consider subscribing to my Successful Investing newsletter. As always, I am happy to answer any of your questions about ETFs, so do not hesitate to email me by clicking here. You just may see your question answered in a future ETF Talk.

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The saga continues in the bond markets, with the sector moving completely out of whack since the Fed’s talk about tapering its easy-money policies entered the global investing consciousness. Recall that in last week’s Making Money Alert, we discussed the liquidation cycle in global equities, emerging markets and Treasury bonds. This week, I thought it would be helpful to take a look at one segment of the bond market that’s really getting slammed, and that’s municipal bonds.

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