Investing in Asia
In the U.S., we’ve got our blue chips. These are investments in some of the most stable, big companies in the U.S. These iconic brands include Coca Cola, International Business Machines (IBM), and Walt Disney.
Fun fact: Other regions around the globe have their own versions of blue chip companies: Big, popular brands with lots of customers.
Why invest in Asia?
Developed Asian economies are home to some of the biggest consumer products and manufacturing companies, whose products you may be using already on a daily basis.
For example, you may drive a Honda or a Toyota, or have a big flat screen TV or smartphone manufactured by Samsung. Such companies are not unlike General Motors, and General Electric, or other large U.S.-based companies.
What’s inside the Pacific Powerhouses ETF?
While the fund owns company stocks in South Korea, Australia, Hong Kong, Singapore and New Zealand, the biggest percentage of the fund’s holdings are in Japan.
- 58% Japan
- 16% Australia
- 13% South Korea
- 9% Hong Kong
- 3% Singapore
This fund is loaded up on consumer electronics and auto companies including Samsung, Toyota and Mitsubishi. But it also has holdings in financial services companies like National Australia Bank, and the multinational corporation Softbank, as wells as the Australian retail chain Woolworths. (No relation to the American chain F.W. Woolworth.)
You’ll also find stocks for mining and fertilizer company Wesfarmers, based in Australia and New Zealand. Hong Kong life insurance company AIA is also in the mix.
Japan is the third largest economy in the world, after the U.S. and China. While Japan has had its share of economic troubles over the years, its economy is currently growing. That’s thanks in part to an economic stimulus, called Abenomics, undertaken by that country’s current prime minister Shinzo Abe.
What are the risks?
While the countries represented in Pacific Powerhouses are some of the most stable economies in the world, the region is subject to some global volatility.
For example, nearby North Korea, which has been flexing its military might, is a wild card.
Japan is also dependent on the U.S. economy, as it exports more than $130 billion in electronics, automobiles, and other goods each year. If the U.S. slides into a recession, it may affect Japan. In general, Vanguard notes, investment in foreign stocks tends to be riskier than investment in U.S. stocks.
The stocks are also bought and sold in currencies other than the U.S. dollar, and values of currency go up and down, which could affect stock holdings.
- If you’re seeking some global diversification in your portfolio, you may want to take a look at the Pacific Powerhouses ETF.
- The majority of the fund’s holdings are big companies in Japan, the third-largest economy in the world.
- The fund contains more than 2,000 stocks for some of the biggest non-U.S. companies globally.
Recommended Reading: Investment Risk and How to Manage It