Topix Index ETF Overview and Key Features

The Topix Index ETF is a popular investment option for those looking to gain exposure to the Japanese stock market. It's a passively managed fund that tracks the performance of the Nikkei 225 index.

The Topix Index is a market-capitalization-weighted index that represents the 2,000 most liquid and actively traded stocks listed on the Tokyo Stock Exchange. This makes it a good representation of the broader Japanese market.

The Topix Index ETF typically invests in a large basket of Japanese stocks, giving investors a diversified portfolio with minimal individual stock risk. This diversification can be beneficial for investors seeking to reduce their exposure to any one particular stock.

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The Topix Index ETF has seen a significant growth in value over the years. In fact, since its inception, the fund has returned a whopping +81.14%.

The fund's performance can be broken down into different time periods, and it's interesting to see how it has performed over the years. Here are some key statistics:

The fund has also seen some fluctuations in its value over the years, with a maximum drawdown of -54.42% since inception. However, it's worth noting that the fund has been able to recover from these downturns and continue growing in value.

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The Total Expense Ratio (TER) of the Topix Index ETF is 0.0863%, which includes the Trust Fee, management fee, and other costs. This is a relatively low expense ratio, indicating that investors can expect to pay a small amount for the fund's management and operations.

The fund's expenses are borne by investors, but the actual amount varies depending on the holding length and investment status. This means that investors who hold the fund for a shorter period or have a smaller investment may pay a higher expense ratio compared to those who hold the fund for a longer period or have a larger investment.

One thing to note is that the fund does not retain any amount in trust assets, meaning that all the money is invested in the market. The TER is calculated based on the data from July 10, 2023, to July 8, 2024, and may change over time.

In order to make informed investment decisions, it's essential to understand the major investment restrictions associated with the Listed Index Fund TOPIX.

The Fund is not offered, guaranteed, or distributed by JPX, but rather by Nikko Asset Management.

This means that investors should be aware that the Fund is subject to its own set of rules and regulations.

The provisions stipulated in Article 37-6 of the Financial Instruments and Exchange Act do not apply to Fund transactions.

This is important to note, as it may affect the way investors can buy or sell units of the Fund.

The Fund differs from deposits or insurance policies in that it is not protected by the Deposit Insurance Corporation of Japan or the Policyholders Protection Corporation of Japan.

This lack of protection means that investors should be cautious when investing in the Fund.

Units purchased from registered financial institutions, such as banks, are exempted from compensation by the Japan Investor Protection Fund.

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This highlights the importance of choosing a reputable financial institution to invest with.

Here are some key points to keep in mind when considering the major investment restrictions of the Listed Index Fund TOPIX:

Risk can be a major concern for investors, and understanding the risks associated with an investment is crucial to making informed decisions. Volatility, the degree of price fluctuations, is a key factor in determining risk.

Assets with higher volatility are generally considered more risky, and we can see this in the data for the past 1, 3, and 5 years. For example, Example 2 shows a volatility of 22.91% for a 1-year period, 19.03% for a 3-year period, and 18.68% for a 5-year period.

Maximum drawdown, the worst possible loss an investor could have suffered during a period, is another important risk metric. According to Example 4, the maximum drawdown for a 5-year period was -27.01%, and the maximum drawdown since inception was -54.42%.

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To get a better understanding of the risk associated with an investment, it's helpful to look at the return per risk, which puts the historical return of an asset in relation to its historical risk. Example 2 shows a return per risk of 0.38 for a 1-year period, 0.29 for a 3-year period, and 0.29 for a 5-year period.

Here is a summary of the risk metrics for the past 1, 3, and 5 years:

As you dive into the world of investing, it's essential to understand the expenses involved with managing a fund. One of the key costs is the Subscription Fee, which is set by the Distributors and can vary.

The Subscription Fee is compensation for explanation and information providing about the Fund or investment environment, and also includes the expense of clerical processing of the subscription.

Exchange Fee is another cost that investors need to consider. It's also set by the Distributors and is compensation for clerical processing of the exchange.

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Some funds may also charge a Trust Fee, which is included in the Total Expense Ratio (TER). The TER for this fund is 0.0863%, which includes the Trust Fee, management fee, and other costs.

Here's a breakdown of the costs paid directly by investors:

The topix index ETF's portfolio composition is a mix of various sectors, with Industrials making up the largest portion at 25.24%.

The sectors are well-represented, with Consumer Discretionary at 17.25%, Financials at 14.31%, Technology at 12.85%, and Other at 30.35%.

The ETF's holdings are diversified across different sectors, with no single sector dominating the portfolio.

TOPIX transitioned from a system that weighted companies based on a collective total figure of outstanding shares to a system that weights companies based on the total number of shares available for trade, known as a free float.

This transition began in 2005 and was completed in the summer of 2006. It has had a substantial impact on the actual weight of companies listed in the index.

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A large majority of companies in Japan also have significant holdings of shares in their business partners to maintain strong business alliances. These shares are no longer included in the index's company weight calculation.

The Japanese practice of business partners having close relationships with one another is called keiretsu, which literally means "headless combine".

Sectors play a crucial role in shaping the overall market trend and investor decisions. TOPIX, a widely used benchmark, divides its constituents into 33 categories based on industrial sectors defined by the Securities Identification Code Committee.

These sectors include construction, textiles and apparels, nonferrous metals, and many others. TOPIX's sector indices are used as a benchmark for investors.

The sector breakdown of TOPIX is as follows:

The sector composition of TOPIX is quite diverse, with a significant portion falling under the "Other" category. This highlights the complexity and breadth of the market.

Our portfolio composition is made up of a diverse range of holdings, with the top 10 holdings accounting for a significant portion of our overall portfolio.

The largest holding in our portfolio is Toyota Motor Corp., making up 3.69% of our total holdings.

Toyota is closely followed by Mitsubishi UFJ Financial Group, Inc., which accounts for 3.03% of our portfolio.

Sony Group Corp. is another significant holding, making up 2.69% of our total portfolio.

Hitachi Ltd. also plays a substantial role, with a 2.54% stake in our holdings.

Recruit Holdings Co., Ltd. is our fifth-largest holding, making up 1.98% of our portfolio.

Sumitomo Mitsui Financial Group, Inc. and KEYENCE Corp. round out the top seven holdings, with 1.92% and 1.71% stakes, respectively.

ITOCHU Corp. and Tokio Marine Holdings, Inc. are tied for eighth place, each making up 1.41% of our portfolio.

Mitsubishi Corp. completes our top 10 holdings, with a 1.40% stake in our overall portfolio.

Here is a breakdown of our top 10 holdings:

Let's take a closer look at some ETFs that track the TOPIX index. Amundi Japan TOPIX II UCITS ETF EUR Dist is one of them, with a fund size of 421 million euros.

This ETF has a TER (Total Expense Ratio) of 0.45% p.a. and distributes its income to investors.

Another option is the Amundi Japan Topix UCITS ETF EUR, which has a smaller fund size of 265 million euros.

This ETF has a TER of 0.20% p.a. and accumulates its income, rather than distributing it.

Here's a brief comparison of the two ETFs:

The Tokyo Price Index, or TOPIX, is a metric for stock prices on the Tokyo Stock Exchange (TSE).

TOPIX is a capitalization-weighted index that lists all firms in the "first section" of the TSE.

This section organizes all large firms on the exchange into one group, making it a good representation of the overall market.

The second section of the TSE pools all of the smaller remaining companies, which are not included in the TOPIX.

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Dividends and Yields are a crucial part of investing in Topix Index ETFs. The dividend yield has been steadily increasing over the years.

In 2021, the dividend yield was 1.44%. This is a significant return on investment. The dividend yield has also been relatively consistent, with a 1-year yield of 0.80%.

Here's a breakdown of the dividend yields over the past few years:

The dividend in EUR has also been increasing over the years, with a high of EUR 2.43 in 2022.