How to Invest in the Nikkei 225

The ranking of companies is determined by stock price, which differs from other major indexes where market capitalization is used in calculations. The index fund will most commonly replicate the performance of the Nikkei 225 by actually purchasing the underlying shares of the companies that make the index. As noted above, this would be a complex task for an individual investor to perform independently, however institutions have the required framework to do this. Therefore, and as the name suggests, the Nikkei 225 includes 225 of Japan’s biggest companies. In order to determine what companies to list, the Nikkei will typically select its constituents by the size of their market capitalization.

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This is because the index itself is there for tracking purposes only, rather than acting as a direct financial instrument. Before the economic downturn came to fruition,  in 1989 the Nikkei peaked at 38,916 points. The scary thing is that almost 30 years later, the Nikkei 225 has still not got anywhere close to the all-time highs it experienced in 1989. The bubble burst in 1990 and the value of the Nikkei Index fell by one-third that year. You can trade ETFs with CFDs, but this offers lower liquidity and larger spreads than trading the Japan 225 directly. One of the most prominent Nikkei ETFs is that of the Nikkei 225 Exchange Traded Fund offered by Nomura Asset Management.

Historical Prices for NIKKEI 225

As such, it wouldn’t make sense to include smaller organizations on the main index, not least because their effect on the health of the wider economy is less notable. As we will discuss below, the most-established of these indexes is the Nikkei 225. The United Kingdom, France, Germany, Switzerland, Italy, and Singapore also offer ETFs that track the Nikkei 225, some of which are cross-listed on the Tokyo Stock Exchange. Several ETFs that track the Nikkei 225 trade on the Tokyo Stock Exchange. They include Blackrock Japan’s iShares Nikkei 225 ETF, Nomura Asset Management’s Nikkei 225 Exchange Traded Fund, and Daiwa Asset swiss franc to hungarian forint exchange rate Management’s Daiwa ETF Nikkei 225.

To trade these ETFs, you must open an account with a brokerage that lets you buy and sell investments not listed on a U.S. exchange. Fidelity Investments is one of the discount brokers that offer international trading accounts. Unlike mutual funds, which are priced at the end of the day, ETFs trade throughout the day. Like mutual funds, ETFs offer diversification through a single investment. The Nikkei 225 index offers traders and investors an avenue to get exposure to the entire Japanese economy in a single position. Like the Dow Jones Industrial Average, the Nikkei 225 Stock Average is a price-weighted equity index.

Moreover, the highest record the Nikkei 225 index has been able to set since its 1989 heights was the 24,270 points it hit in December 2018. The index continued to fall during that entire year, hitting a low of 8,160.01 on Nov. 25. That year, the Nikkei dropped more than 17%, finishing at 8,455.35, representing the lowest year-end price in over 30 years. Stay on top of upcoming market-moving events with our customisable economic calendar. Discover the range of markets Affordable blue chip stocks and learn how they work – with IG Academy’s online course.

Although the expense ratio is slightly higher at 0.22%, this still provides good value if you prefer the ETF route. The ETF itself operates on the Tokyo Stock Exchange, meaning that you have the option of trading it on the open marketplace at your will. In other words, those involved in the Nikkei 225 investment space back in the mid-to-late 1980s would have no doubt been hit hard by the crash. On the other hand, the index has been performing reasonably well since late 2012, where it was priced in the region of 8,00 points. However, this doesn’t necessarily make the Nikkei 225 index an unworthy investment.

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According to the Nikkei 225 “Stock Average Fact Sheet,” the Nikkei 225 is calculated every 5 seconds while the Tokyo Stock Exchange is open.

The companies listed on the Nikkei 225 index include global brands such as Sony, Canon, Toyota, Nissan and many others. The 225 companies are spread out over 35 industries, with each stock measured based on its performance. As the main index traded on the Tokyo Stock Exchange (JPX), the Nikkei 225’s performance is representative of what’s happening in the Japanese economy. Due to the size of the Japanese economy and its position on the continent, the Nikkei 225 index can be a useful indicator of market sentiments in the region of East Asia.

1. In fact, at the time of writing in March 2019, the Nikkei 225 index is positioned at just over 21,500 points.
2. You would essentially need to purchase 225 individual stocks, which would not only be expensive, but highly complicated.
3. The reason for this is that the market value of the Nikkei 225 ETF will rise and fall throughout the day.
4. While the Nikkei is an index of 225 selected stocks from the TSE, the TOPIX is an index that includes all the stocks in the TSE.

The Nikkei 225 does not accurately reflect how stock averages tend to steadily and exponentially grow. On Dec. 29, 1989, the Nikkei achieved a historic high of 38,957.44 intraday, before closing at 38,915.87. TOPIX, on the other hand, uses the capitalization-weighted method for all the stocks in the TSE’s first section. TOPIX is affected by stocks with large market valuations, such as financials. The index has been calculated since September 1950, retroactive to May 1949. Among the best-known companies included in the Nikkei index are Canon Incorporated, Sony Corporation, and Toyota Motor Corporation.

Alternatively, you’ll trade via futures which have wider spreads but no overnight fees using our CFD trading account. An alternative avenue that you can take to invest in the performance of the Nikkei 225 is to purchase an ETF. ETFs are financial instruments that have the capacity to track virtually any asset class. Whether its oil, interest rates, Gold or foreign currency, you’ll find ETFs on the vast majority of major exchanges.

The Japanese stock index used to be called the Nikkei Dow Jones Stock Average, from 1975 to 1985. It was later changed, named after the Nihon Keizai Shimbun or Japan Economic Newspaper, which is commonly known as Nikkei. MoneyCheck launched in 2018 with the goal of covering personal finance and investment news in in a clear and concise way. So now that you know how the Nikkei 225 has performed over the past 30 years, in the next section of our guide we are going to show you how you can make an investment.

The fund aims to replicate the performance of the Nikkei 225 by purchasing the shares that constitute the index. As such, you will need to use a third party institution that tracks the Nikkei 225 index themselves. Each institution will have their own underlying mechanisms in their attempt to track the official index. Furthermore, some index funds or ETFs will even attempt to beat the official index, by making some weighting adjustments. In its most basic form, the Nikkei 225, or simply the ‘Nikkei’, is a mechanism that tracks the performance of the Tokyo Stock Exchange. It is important to recognize that because there are now more than 3,500 individual companies listed on the main Tokyo Stock Exchange, the Nikkei instead tracks a limited number of equities.

For those unaware, in the mid-to-late 1980s, the Japanese economy experienced one of the biggest financial bubbles that the world has ever seen. First and foremost, tracking the performance of more than 3,500 companies would be a logistical nightmare, especially when one considers the amount of trading that occurs on a daily basis. However, and perhaps more importantly, the vast majority of the Japanese stock marketplace is dominate by the companies sat at the very top of the market capitalization rankings.

This responsibility falls to the Japanese business newspaper, Nihon Keizai Shimbun (Nikkei), which calculates and oversees the index. The Nikkei is short for Japan’s Nikkei 225 Stock Average, the leading and most-respected index of Japanese stocks. It is a price-weighted index composed of Japan’s top 225 blue-chip companies traded on the Tokyo Stock Exchange. The Nikkei is equivalent to the Dow Jones Industrial Average (DJIA) Index in the United States.

However, this only includes blue-chip companies, and thus, excludes discover the different strategies available for trading cfds the likes of ETFs and other non-equity based securities. It is not possible to directly purchase an index, but there are several exchange-traded funds (ETFs) whose components correlate to the Nikkei. ETFs that track the Nikkei and trade on the Tokyo Stock Exchange include Blackrock’s iShares Nikkei 225 and Nomura Asset Management Nikkei 225 Exchange Traded Fund. The MAXIS Nikkei 225 Index ETF is a dollar-denominated fund that trades on the New York Stock Exchange.