You would essentially need to purchase 225 individual stocks, which would not only be expensive, but highly complicated. As such, you would instead by best utilizing either an index fund or exchange traded fund (ETF). 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. Nikkei Inc. has developed and calculated its own indexes from various perspective, looking at changes in society and markets. The Nikkei is price-weighted, which means the index is an average of the share prices of all the companies listed.

This responsibility falls to the Japanese business newspaper, Nihon Keizai Shimbun (Nikkei), which calculates and oversees the index. 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. In addition to monitoring the performance of the Nikkei 225, you must consider exchange rate fluctuations between the yen and the dollar. 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.

What Affects the Price of the Nikkei 225?

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. While the above figures do make nervous reading, it is important to remember that investing is all about timing. For those not familiar with the Yen, that amounts to GBP£270 billion or US$357 billion.

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1. In fact, at the time of writing in March 2019, the Nikkei 225 index is positioned at just over 21,500 points.
2. Two working days after a giant earthquake rattled the northeast section of Japan on March 15, 2011, the Nikkei plummeted more than 10%, to 8,605.15—a drop of 1,015 points.
3. The Nikkei index (also referred to as the Nikkei 225) is a stock market that lists the 225 largest companies based in Japan.
4. The tech industry is the largest sector weighted on the Nikkei index, followed by other industries involved in consumer products, transportation and utilities.
5. You can trade this on the spot price, which is closest to the underlying price with low spreads, but includes overnight fees.

This will include an overview of the Tokyo Stock Exchange itself, as well as a discussion on how an index works. Moreover, we’ll also explore what types of companies make the Nikkei 225 Index, and how the index is calculated. The following chart shows the history of the Nikkei 225 in the 21st century, highlighting the major fundamental events that shaped its price.

The Tokyo Stock Exchange and the Nikkei 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.

Furthermore, some index funds or ETFs will even attempt to beat the official index, by making some weighting adjustments. 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. If you thought the bubbles of the Dot.com boom of the late 1990s or the housing market crash of 2008 were bad, nothing gets close to what Japan experienced.

If you seek broad exposure to the Japanese stock market through investments whose underlying assets track the Nikkei 225, ETFs may be the way to go. One option is the MAXIS Nikkei 225 Index ETF, which offers exposure to the Japanese stock market with a U.S.-listed, dollar-denominated exchange-traded fund. Much like in the case of other major stock exchanges, the Tokyo Stock Exchange bridges the gap between corporations and investors. Through the use of real-time electronic tracking, the exchange details the current trading prices available on each of the companies it lists. The Nikkei 225 is a major stock market index that lists the 225 largest companies by price weighting on the Tokyo Stock Exchange.

Other financial services

MoneyCheck is a fast-growing online publication launched in 2018 with the aim of covering personal finance and investment news. 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. 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. According to the Nikkei 225 “Stock Average Fact Sheet,” the Nikkei 225 is calculated every 5 seconds while the Tokyo Stock Exchange is open.

Our analyst articles offer in-depth insights on the Nikkei 225 and its constituent stocks to inform your trading. You can trade this on the spot price, which is closest to the underlying price with low spreads, but includes overnight fees. Alternatively, you’ll trade via futures which have wider spreads but no overnight fees using our CFD trading account. Diversification can come in the form of Nikkei-linked ETFs or individual Nikkei shares, which you can also trade on.

In addition to government bonds, the TSE also acted as an exchange for gold and silver currencies. To compile the list of stocks, a review is conducted once a year in September, with changes to the ranking and composition implemented in October. The tech industry is the largest sector weighted on the Nikkei index, followed by other industries involved in consumer products, transportation and utilities. However, you can gain exposure to this index through buying shares of an ETF that tracks the Nikkei. One of the leading index funds in this respect is the Daiwa Japan Nikkei 225 Index Fund.

In fact, to give you an idea as to just how artificial the bubble was, in the 15 years prior to 1990, the Nikkei stock index increased by more than 900%. 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 https://www.tradebot.online/ 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. Nikkei retains all intellectual property rights to the Nikkei Stock Average and other Nikkei Indexes.

Sectors represented in the index include technology, financials, consumer goods, materials, capital goods, transportation, and utilities. In all, the Nikkei index comprises companies from 36 different industries. One of the most prominent Nikkei ETFs is that of the Nikkei 225 Exchange Traded Fund offered by Nomura Asset Management. Although the expense ratio is slightly higher at 0.22%, this still provides good value if you prefer the ETF route.

DailyFX Limited is not responsible for any trading decisions taken by persons not intended to view this material. This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result.

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Constituent stocks are ranked by share price, rather than by market capitalization as is common in most indexes. The composition of the Nikkei is reviewed every September, and any needed changes take place in October. The Nikkei index (also referred to as the Nikkei 225) is a stock market that lists the 225 largest companies based in Japan. The historical performance of the Japanese stock exchange and thus, the Nikkei 225 index, is potentially one of the most interesting talking points with respect to major indexes. 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. Launched back in 1950, the Tokyo Stock Exchange is the largest stock exchange in Japan, and the fourth largest in the world by market capitalization.

You’ll also trade the Nikkei 225 directly with us via our Japan 225 offering. Our offering tracks the Nikkei index, enabling you to make a prediction on the direction of the market price. The Nikkei 225 index offers traders and investors an avenue to get exposure to the entire Japanese economy in a single position. An alternative avenue that you can take to invest in the performance of the Nikkei 225 is to purchase an ETF.