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Is WisdomTree Japan SmallCap Dividend ETF (DFJ) a Strong ETF Right Now?

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The WisdomTree Japan SmallCap Dividend ETF (DFJ - Free Report) was launched on 06/16/2006, and is a smart beta exchange traded fund designed to offer broad exposure to the Asia-Pacific (Developed) ETFs category of the market.

What Are Smart Beta ETFs?

Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.

A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.

If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.

Fund Sponsor & Index

The fund is managed by Wisdomtree, and has been able to amass over $241.68 million, which makes it one of the average sized ETFs in the Asia-Pacific (Developed) ETFs. DFJ, before fees and expenses, seeks to match the performance of the WisdomTree Japan SmallCap Dividend Index.

WisdomTree Japan SmallCap Dividend Index measures the performance of dividend-paying small capitalization companies in Japan. After the 300 largest companies have been removed from the WisdomTree Japan Dividend Index, the remaining companies are chosen for inclusion in the Index. Companies are weighted in the Index based on annual cash dividends paid.

Cost & Other Expenses

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.

With one of the more expensive products in the space, this ETF has annual operating expenses of 0.58%.

It has a 12-month trailing dividend yield of 2.54%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

When you look at individual holdings, Haseko Corp accounts for about 1.50% of the fund's total assets, followed by Mitsubishi Gas Chemical Co Inc and Matsui Securities Co Ltd.

The top 10 holdings account for about 7.81% of total assets under management.

Performance and Risk

The ETF has lost about -6.24% and is down about -3.69% so far this year and in the past one year (as of 11/02/2020), respectively. DFJ has traded between $49.20 and $75.84 during this last 52-week period.

The ETF has a beta of 0.67 and standard deviation of 20.49% for the trailing three-year period, making it a medium risk choice in the space. With about 791 holdings, it effectively diversifies company-specific risk.

Alternatives

WisdomTree Japan SmallCap Dividend ETF is a reasonable option for investors seeking to outperform the Asia-Pacific (Developed) ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

JPMorgan BetaBuilders Japan ETF (BBJP - Free Report) tracks MORNINGSTAR JAPAN TRGT MRKT EXPOSURE ID and the iShares MSCI Japan ETF (EWJ - Free Report) tracks MSCI Japan Index. JPMorgan BetaBuilders Japan ETF has $5.35 billion in assets, iShares MSCI Japan ETF has $10.33 billion. BBJP has an expense ratio of 0.19% and EWJ charges 0.49%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Asia-Pacific (Developed) ETFs.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.


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