Looking to diversify this year? 2023 posed plenty of risks to the U.S. economy and though it avoided most, 2024 offers its own challenges. An expensive U.S. equities market could dip if disappointed by the Fed’s slow rolling of rate cuts, for example. The lagging impact of rate hikes could also pose an issue. Those factors may speak to the appeal of investing abroad, with Japan ETF DXJ an intriguing option following a strong 2023.
See more: Play Japan’s Inflation Story With DXJ
Why consider a Japan ETF? Japan proved to be one of the better economic storied globally last year. Compared to a disappointing China, Japan has looked solid. More than solid, actually, as the Nikkei 225 index nears a record it set back during Japan’s economic heyday in the late 80s. That has Japanese economic leaders suggesting now could be time for Japan to break out of decades of disappointing growth.
That’s where a Japan ETF like DXJ could come in. DXJ, the WisdomTree Japan Hedged Equity Fund, has returned a robust 44% over the last year. That significantly outperformed both its ETF Database Category and Factset Segment averages over that period. What’s more, it is still providing solid returns this year, too, returning 9% over the last month.
DXJ tracks the WisdomTree Japan Hedged Equity UCITS Index, providing exposure to Japanese equities for a 48 basis point (bps) fee. In doing so, however, it adds a twist, hedging out currency fluctuations.
That sets it apart from other Japan ETF strategies that may not do so. What’s more, that allows DXJ to benefit from the so-called “carry effect” from the gap in U.S. and Japanese interest rates. Taken together, DXJ could offer one strong option that diversifies away from the U.S.
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