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One of the most important tasks of a savvy investor is a continuous pursuit of portfolio diversification. There are multiple ways to search for uncorrelated or little correlated investments by focusing, for example, on different asset classes, regions, or sectors of economy. In this article, I would like to describe a simple framework for geographical diversification implemented using individual country ETFs.
Adaptive Asset Allocation (AAA) is based on the Nobel Prize winning portfolio theory of Markowitz (1952).
Since Japan’s bubble busted at the start of the 1990s, the country’s stocks have registered five major rallies. The region’s shares have been gaining in recent times too. iShares MSCI Japan ETF (EWJ - Free Report) added about 2.5% in the last one month and more than 0.7% in the last 10 days (as of Nov 13, 2017). (7-0)
For the fourth week in five, investors were net purchasers of fund assets (including those of conventional funds and ETFs), injecting $17.5 billion. Investors padded the coffers of equity funds (+$4.7 billion), taxable bond funds (+$1.6 billion), money market funds (+$10.8 billion), and municipal bond funds (+$463 million). Despite the lower-than-expected October nonfarm-payrolls report, investors continued to send the three major indices to new record highs during the fund-flows week ended November 8, 2017. (166-0)
The month of October was pretty eventful with sturdy tech earnings, approval of the budget blueprint in the Senate and House, some upbeat U.S. economic data, a dovish QE taper announced by ECB and Abe’s win in Japan. All these charged up the global markets. (33-0)
Prime Minister Shinzo Abe and his Liberal Democratic Party [LDP] achieved a landslide victory in the snap election held Sunday, assuring that his ruling coalition retains its two-thirds majority in Japan's lower house. It also makes it very likely that Abe will be selected next year to continue to head the LDP. The LDP faced an opposition that was weak and divided. Abe's popularity has recovered from damage done by several scandals earlier in the year, helped by his tough statements in reaction to threatening actions by North Korea and a strong economic record.
The landslide victory of prime minister Shinzo Abe in a snap election has infused further optimism in the economy and the stock market. Per Japanese media, Abe's Liberal Democratic Party and a small coalition partner had together secured at least 312 seats in the 465-seat lower house of parliament, passing the 310-barrier for a two-third majority. The success has bolstered his chances of winning another three-year term next September, putting Abe on course to becoming post-war Japan’s longest-serving leader. (4-0)
North Korean tensions once again flared up after President Trump returned with his incendiary comments against the rouge nation. “Presidents and their administrations have been talking to North Korea for 25 years, agreements made and massive amounts of money paid hasn’t worked, agreements violated before the ink was dry, makings fools of U.S. negotiators,” Trump said in a pair of tweets. (17-1)
Last year I recommended an investment in cheap Japanese stocks, but with a currency hedge to protect against falls in yen versus the US dollar. Almost thirteen months later, that recommendation has made 30%, measured in US dollars. Japanese stocks are still cheap today. But, due to new circumstances, I've decided it's time to take profits and sell.
The Japanese economy has long been at the receiving end of the beneficial easy money policy, which has put the economy on the growth path. Though Japanese inflation is yet to pick up meaningfully, an uptick in domestic demand as well as external demand is something investors should cheer for (read: Japan Economy on the Mend? ETFs in Focus).
Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.
Like the last few months, the international market looked bright in July though the level of upper hand eased somewhat last month. SPDR S&P 500 ETF (SPY - Free Report) – representative of the U.S. market –added about 2.3% in the last one month (asof July 28, 2017) while all-world ETF iShares MSCI ACWI ETF (ACWI - Free Report) saw similar gainsof 2.9%.
Over the past 12 months, as of July 6th, the Japanese equity market outperformed. The TOPIX index increased 31.1% and the NKY 225 30.5%. These figures compare with increases of 14.8% for the S&P 500, 19.35% for the STOXX Europe 600, and in Asia, 22.4% for the MSCI AC Asia Pacific ex Japan Index. Similar outperformance was registered over the past three months: TOPIX, 7.9% and NKY 225, 6.8%, versus S&P 500, 2.
For investors looking for momentum, iShares MSCI Japan ETF (EWJ - Free Report) is probably on your radar now. The fund just hit a 52-week high. Shares of EWJ are up roughly 17.5% from their 52-week low price of $44.60/share.
The recovery of the global economy has continued thus far in 2017, and stock markets have generally registered healthy advances. In the US, the SPDR S&P 500 ETF, SPY, gained 5.62 year-to-date April 11 on a total return basis; the iShares MSCI ACWI ex-U.S. Index ETF, ACWX, gained 8.12%; and in Asia the iShares MSCI All Country Asia ex-Japan Index ETF, AAXJ, rose a strong 13.85%. In contrast, in Japan the TOPIX dropped 2.
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