Top 3 best ETFs for investing in Japan

How to invest in Japan with ETF?
For those who wish to expose their financial portfolio to this country, Exchange-Traded Funds (ETFs) represent a versatile and efficient option. In this article, we will explore a selection of ETFs that allow you to invest in the Japanese stock market and that offer various strategies and focuses, from sustainability to broader investments.

1. WisdomTree Japan Equity UCITS ETF USD Hedged

The WisdomTree Japan Equity UCITS ETF is a product that offers investors exposure to Japanese equities with a particular focus on ESG (environmental, social, and corporate governance) criteria. Its main objective is to replicate the WisdomTree Japan Equity Index (USD Hedged). The distinguishing feature of this ETF is the US dollar (USD) currency hedge, which helps mitigate currency risk for investors.

Key indicators:

• Fund size: approximately 35 million euros (37 million USD).
• Synthetic Expenditure Indicator (TER): 0.48% per year.
• Distribution Policy: biannual.

The ETF has demonstrated good performance over time, with a YTD return of 38.95% and positive returns over various time horizons, including 1 year, 3 years, and 5 years. Its semi-annual distribution policy may be attractive to investors looking for regular cash flows.

2. iShares MSCI Japan USD Hedged UCITS ETF (Acc)

This ETF focuses on the MSCI Japan (USD Hedged) Index, offering broader exposure to leading Japanese stocks with a currency hedge to the US dollar (USD). A distinctive feature is the dividend accumulation policy, which means that dividends are reinvested in the ETF rather than distributed to investors.

Key indicators:

• Fund size: approximately 320 million euros (341.5 million USD).
• Synthetic Expenditure Indicator (TER): 0.64% per year.
• Distribution Policy: Accumulation.

The iShares MSCI Japan USD Hedged UCITS ETF has demonstrated solid returns across various time horizons, with a YTD return of 31.96%. The dividend accumulation policy may be suitable for investors who wish to reinvest cash flows for potential accumulation over time.

3. BNP Paribas Easy MSCI Japan ESG Filtered Min TE UCITS ETF EUR Hedged

This ETF offers exposure to Japanese equities with a specific focus on ESG criteria, as well as criteria for minimizing tracking error compared to the MSCI Japan benchmark index. Its currency hedge is in Euros (EUR), which means it is not exposed to currency risk. Furthermore, this ETF follows a dividend accumulation policy.

Key Indicators:

• Fund size: approximately 145 million euros (154.8 million USD).
• Synthetic Expenditure Indicator (TER): 0.15% per year.
• Distribution Policy: Accumulation.

This ETF demonstrated good performance with a YTD return of 31.88%. The low overall expense (TER) is a boon for investors looking for efficient cost management. The dividend accumulation policy can be beneficial for long-term capital growth.

What is the best ETF to invest in Japan?

The three Japanese stock market ETF products offer different features and approaches, each with its own strengths and limitations.

Let’s start with the WisdomTree Japan Equity UCITS ETF USD Hedged. This ETF stands out for its strong focus on ESG (environmental, social, and corporate governance) aspects within the Japanese market. Furthermore, it offers currency hedging into the US dollar (USD), thus reducing the currency risk for investors. With a total expense ratio (TER) of 0.48% per year, it represents a cost-efficient choice. However, its assets under management are relatively small, at only around €35 million, which could raise concerns about liquidity and market depth.

The iShares MSCI Japan USD Hedged UCITS ETF (Acc) offers broader exposure to leading Japanese stocks and tracks the MSCI Japan (USD Hedged) index. Its dividend accumulation policy, which reinvests returns into the ETF, could be attractive to long-term investors seeking compound growth. With a TER of 0.64% per year and assets under management of 320 million euros, it offers not very efficient cost management, but it is one of the largest products in its segment. However, it lacks a specific focus on ESG aspects, which may not suit investors sensitive to these criteria.

The BNP Paribas Easy MSCI Japan ESG Filtered Min TE UCITS ETF EUR Hedged, on the other hand, stands out for its emphasis on ESG criteria and on the minimization of tracking error compared to the MSCI Japan reference index. Furthermore, it offers currency hedging in Euros (EUR), thus eliminating exchange rate risk. With a TER of 0.15% per annum and assets under management of €146 million, it is a highly efficient option from a cost and liquidity perspective. However, its returns may be more volatile than other ETFs. The dividend accumulation policy, which allows reinvestment of returns, makes it attractive for long-term investors.

Ultimately, the choice between these three ETFs will depend on individual investor preferences. If ESG is a priority, the WisdomTree Japan Equity UCITS ETF USD Hedged may be the best choice. If you are looking for greater diversification and a dividend accumulation policy, the iShares MSCI Japan USD Hedged UCITS ETF (Acc) could be a great option. Meanwhile, the BNP Paribas Easy MSCI Japan ESG Filtered Min TE UCITS ETF EUR Hedged offers a combination of ESG criteria and highly efficient cost management. It is important to carefully consider your personal investment objectives and preferences before making a decision.

|Disclaimer
The information and considerations contained in this article should not be used as the sole and principal basis on which to make investment decisions. The reader retains full freedom in his own investment choices and full responsibility in making them, since he alone knows his risk appetite and his time horizon. The information contained in the article is provided for informational purposes only and its disclosure does not constitute and should not be considered an offer or solicitation for public savings.| Original article published on Money.it Italy 2023-11-08 07:55:00. Original title: I migliori ETF per investire in Giappone