Choppy waters surrounding Japan?

By Dian Vujovich

Having a country component added to your portfolio can be rewarding. Take Japan, for instance. Their market has been on a tear with some funds up over 100 percent in the past year. And then it happened—as it always and eventually does— things changed.

Over the past seven months, Japan’s Nikkei Index has been up about 80 percent. Then on Thursday, in one single day, it fell 7.3 percent. That’s the worst one-day drop for that index since the country suffered a horrific earthquake in March 2011.

That said, if a sizable one day drop is enough to scare you out of a country holding, perhaps honing in on one portion of the world to invest in isn’t for you. Markets—here as well as abroad—are volatile. They always have been and always will be. Country markets in particular.

For those who know that foreign waters run choppy, the question of whether to jump in, add to or stay invested in the markets in the Land of the Rising Sun,  is a complicated one to answer.

On the one hand, the Nikkei is up about 37 percent this year. Plus, thanks to the Prime Minister Abe’s “Abenomics”, the support of the Bank of Japan and the decisions to increase monetary stimulus to kick-start the economy, the hope is that –by basically following our lead and printing plenty of money— that good times will follow.

On the other hand, wherever there’s a soaring market there’s a correcting one waiting in the wings.

One way to play the Japanese market is through exchange-traded funds. Two ETFs with stellar performance results so far this year include The DBX-Tracker MSCI Japan Hedged Equity Fund (DBJP) and the Wisdom Tree Japan Hedged Equity Fund (DXJ). Both are up over 37.5 percent.

Want to play the Japanese Yen and the U.S. dollar exchange rate, and the iPath JPY/USD Exchange Rate ETN  (JYN) was up 60.7 percent Friday (5/24/13/).  In the past year, however, the chart on that ETF has been heading south.

But we all know there is more to performance than meets the eye. So here’s some cautionary thoughts from the May issue of the “No-Load Fund Analyst, a Litman Gregory Publication: ” While Japanese stocks may continue to rise on the back of the recent announcement of more aggressive quantitative easing, we still can’t make a compelling long-term valuation case for a tactical position.”

U.S News looked at 13 Japanese ETFs. Check out that research at:

money.usnews.com/funds/etfs/rankings/japanese-funds