Individual investors who piled into hot-performing Japan ETFs this year could end up holding the bag if this week’s Nikkei plunge is the start of something worse.
WisdomTree Japan Hedged Equity (NYSEArca: DXJ) and iShares MSCI Japan (NYSEArca: EWJ) are the two best-selling ETFs this year, reeling in $7.6 billion and $5.6 billion, respectively, according to IndexUniverse data.
They were on track for weekly losses of more than 6% in midday trading Friday.
Performance-chasing often shows up in ETF flow trends.
Financial advisors have also started allocating money to Japan for the first time in years, WSJ.com’s Total Return blog reports.
“And, as is often the case, investors seem to have sunk the most money in the ETF right before the plunge,” it added. “Don’t expect Japan ETF investors to be crying in their soups just yet. The WisdomTree ETF is still up 29% this year. But if Japan’s crash continues, many small investors will be along for the ride.” [Currency-Hedged Japan ETFs Fall Harder as Yen Strengthens]