Growth stocks have been hot buys this year and one country that's the source of lots of innovation is Japan. Whether you're looking for some geographical diversification or just want exposure to big Japanese brands, the iShares MSCI Japan ETF (NYSE Arca:EWJ) makes for a great option.
The exchange-traded fund (ETF) has exposure to both large and mid-sized Japanese companies. And the fund is incredibly diverse as it has more than 230 holdings. At an average price-to-earnings multiple 14, the ETF offers some good value as well. The ETF's expense ratio is 0.50%, which is in line with what investors might expect with a similar fund.
Industrials account for 23% of the ETF's weight, followed by consumer discretionary stocks at 18%, tech stocks at 14%, and financials at 11% are the only other sector that makes up more than 10%. Investors will recognize many of the top stocks in the fund, including big names such as Toyota Motor (NYSE:TM), Sony Group (NYSE:SONY), and Hitachi (OTC:HTHIY) – all three are among the ETF's top 10 holdings. But given the vast number of holdings, no stock accounts for even 5% of its total weight. This is important for risk-averse investors as it means a single stock won't drastically impact the fund and therefore it can offer some good stability.
Year to date, the ETF has risen 10% in value, slightly outperforming the S&P 500 which is up around 8%. Over a five-year period, however, the S&P has made for a much better buy, rising 52% in value while the MSCI Japan ETF's returns have been flat.
While this wouldn't be a good place to invest all or most of your money into, this Japanese-focused fund can be a good way to diversify and perhaps be a good investment if you're worried about the U.S. economy.
