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.
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 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.
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:
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:
There are several ETFs that track the Nikkei 225, including:
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.
The graph below tracks how the Nikkei 225 has performed over the past year. Figures are stated in Japanese Yen (JP¥).
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 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.
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.
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