Where (in the World) Financial Pros Are Investing

With international conflict at the front of everyone’s minds, we wanted to see where financial pros were looking to invest internationally.

It turns out Japan Hedged Equity Fund (DXJ) was the top search.

It’s an interesting play that invests in Japanese stocks while hedging against currency risk.

When most investors think of Japan, they remember the booming ‘80s, followed by decades of stagnation.

But it turns out, things might be starting to look up for the economic powerhouse.

Key Facts About DXJ

• Net assets: $3.14 billion
• 12-month trailing yield: 2.83%
• Inception: June 16, 2006
• Expense ratio: 0.48%
• Number of holdings: 435

Currency plays an important role for international investors.

So, to give folks a ‘pure play’ on the Japanese stock market, the WisdomTree Japan Hedge Equity Fund removes currency from the equation by hedging against fluctuations.

This way, you can own a portfolio of over 400 Japanese equities without having to worry about how exchange rates play into your decisions.

Source: ETFDB.Com

The DXJ is a dividend-weighted index, giving it more exposure to large cap companies and a heavier leaning towards financials, consumer durables, and producer manufacturing.

Source: ETFDB.Com

Performance

The DXJ has done remarkably well,  with it’s 5-year performance slightly above the S&P 500 ETF, the SPY.

However, if you extend it to a 10-year period, the S&P 500 holds up much better.

Source: WidsomTree

Competition

Rather than compare the DXJ to other Japanese ETFs, we wanted to see how it stacked up against other popular international ETFs.

• iShares MSCI Emerging Markets ETF (EEM): The most popular Emerging Market ETF that holds stocks from countries including Brazil, China, India, and South Africa.
• iShares MSCI EAFE ETF (EFA): Want exposure to mature markets outside the U.S.? The EFA invests in countries like Japan, Australia, and many that make up Western Europe.
• Xtrackers Harvest CSI 300 China A-Shares Fund (ASHR): If you want to invest in companies listed on the Shenzhen and Shanghai exhcanges, the ASHR is the best way to own mainland Chinese stocks outside of Hong Kong.
• iShares International Select Dividend ETF (IDV): The IDV combines developed markets and dividends to give holders exposure to a balanced income portfolio. 

The DXJ beats other ETFs in this area hands down, with the EFA coming in second, highlighting the outperformance of developed markets.

Our Opinion 10/10 

If you want to invest in Japan, the DXJ is by far the best way to go about it.

It takes one of the biggest problems, currency risk, off the table, and allows you to hold a nice basket of Japanese equities.

While the expense ratio is a bit higher than the unhedged version, we believe the ease of investing more than makes up for the extra costs.