What is the Nikkei 225 Index? Complete Beginner’s Guide

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. The Nikkei 225 does not accurately reflect how stock averages tend to steadily and exponentially grow.

1. TOPIX, on the other hand, uses the capitalization-weighted method for all the stocks in the TSE’s first section.
2. A wobble in any given sector, like tech, will impact the price of the Nikkei.
3. As an individual outside of Japan, the best way to gain exposure to Japanese companies is through American Depository Receipts (ADRs) or exchange-traded funds.
4. More than 70 years have passed since the commencement of its calculation, which represents the history of Japanese economy after the World War II.

You can buy individual shares via your broker or track the index by investing in a tracker fund or an exchange-traded fund (ETF). Investing in the Nikkei offers exposure to major Japanese industries and diversification, albeit with unique risks tied to Japan’s economy and the index’s price-weighted nature. This unique calculation makes it more sensitive to stock price fluctuations. The broader Nikkei 500 includes 500 companies, providing a more comprehensive picture of the Japanese economy. Nikkei 500 consists of 500 companies from various sectors, making it a more diverse and broader representation of the Japanese stock market.

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You can trade or invest in the Nikkei 225 via our Japan 225 offering with our CFD and share trading accounts. Trading on a CFD account enables you to take a position on the Japan 225’s price rise or fall, without taking outright ownership of the underlying asset. You’ll buy and hold the actual shares in a Japan 225-listed company using our share trading account. Alternatively, you can trade on the Japan 225-listed stock price movements using CFDs without owning the underlying asset. A price-weighted index assigns weight to each component company based on its stock price. This means that companies with higher stock prices have a more significant influence on the index’s value, regardless of their total market capitalization.

Dividend payments and stock market turnover are not considered when calculating the index. 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. ADSS forex broker 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. 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.

The total value of the index is the sum of the stock prices of all 225 companies, adjusted by a divisor for stock splits and other corporate actions. As the name suggests, Nikkei 225 comprises 225 of the largest and most liquid companies listed on the Tokyo Stock Exchange. It is a price-weighted index, meaning that the stock prices of the constituent companies determine their influence on the index. Companies with higher stock prices axi forex broker review exert more significant influence on the index’s value, even if their overall market capitalization is smaller than other companies in the index.

What are the Nikkei 225 companies?

As an individual outside of Japan, the best way to gain exposure to Japanese companies is through American Depository Receipts (ADRs) or exchange-traded funds. Although international traders cannot invest directly in the index, you can gain exposure to the underlying stocks within the Nikkei 225 via an exchange-traded fund (ETF). 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.

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We have expanded over the years to include newer topics such as blockchain, eCommerce and tech news but have remained true to our original vision and are now trusted by millions of visitors each year. 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. 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. However, this doesn’t necessarily make the Nikkei 225 index an unworthy investment.

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. No representation or warranty is given as to the accuracy or completeness of this information. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it.

How can you trade the Nikkei 225?

This includes some of Japan’s biggest brands, notably Honda, Mitsubishi and Toyota. The Nikkei is price-weighted, which means the index is an average of the share prices of all the companies listed. Because each company’s stock is weighted by its price per share, the Nikkei tends to be influenced by high-priced stocks such as technology stocks. 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 How to buy bitcoin with prepaid card using our CFD trading account.