We think conservative investors could hold up to 10% of their portfolios in foreign stocks. One way to do that is to buy carefully chosen exchange traded funds (ETFs) that have an overseas focus. The best ETFs offer very low management fees and well-diversified, tax-efficient portfolios of high quality stocks.
ISHARES MSCI JAPAN INDEX FUND (American Exchange symbol EWJ; us.ishares.com) is an exchange traded fund that tries to match the return of the Morgan Stanley Capital International (MSCI) Japan index.
The ETF’s top holdings include Toyota, 5.2%; Mitsubishi UFJ Financial, 2.8%; Honda Motor, 2.5%; Sumitomo Mitsui Financial, 2.0%; Takeda Pharmaceutical, 1.8%; Canon, 1.8%; Mizuho Financial Group, 1.8%; Fanuc Corp., 1.5%; Softbank Corp., 1.4%; and Japan Tobacco Inc., 1.3%.
The fund’s industry breakdown is as follows: Industrials, 20.6%; Consumer Discretionary, 19.1%; Financials, 18.5%; Information Technology, 11.1%; Consumer Staples, 7.2%; Health Care, 7.2%; Materials, 6.3%; Telecommunication Services, 4.5%; Utilities, 2.7%; and Energy, 1.6%.
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Reconstruction spending supporting Japanese economy
iShares MSCI Japan Index Fund was launched on March 12, 1996. Its expense ratio is 0.51%.
Japan’s exports have slowed along with the global economy, and that’s hurting the country’s overall growth.
Still, reconstruction spending in the wake of the March 2011 earthquake and tsunami is supporting the country’s economy. Japan will likely grow 2.0% this year.
In the latest issue of Canadian Wealth Advisor, we look at the long-term outlook for Japan’s economy. We also examine how the dispute between China and Japan over ownership of the Senkaku/Diaoyu islands in the East China Sea is affecting economic exchanges between the two countries. We conclude with our clear buy-hold-sell advice on this ETF.
COMMENTS PLEASE—Share your investment knowledge and opinions with fellow TSINetwork.ca members
If you have a portion of your portfolio set aside for foreign stocks (other than U.S.) how do you decide which countries to invest in? Have you ever invested on foreign stock exchanges or do you do so only through ADRs or ETFs? Let us know what you think.
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