Market Insight: Beware, investor trap: Japan's Nikkei is poorly constructed
The Japanese benchmark index has risen by around 65 percent since 2025. But anyone who buys an ETF on it takes on a hidden risk, warns Andrea Cünnen.
Japan's Nikkei 225 index, a key indicator of the country's stock market performance, has been gaining significant attention from investors lately. The index, which reached a 65% gain since early 2025, has outperformed both the US S&P 500 and Japan's Topix by more than double and by 45%, respectively. Despite these impressive gains, many analysts warn that the Nikkei 225 may not be as robust as it seems due to its "constructive disaster" design, as stated by Ali Masarwah, CEO of the independent fund manager Envestor.
This construction flaw is particularly relevant for investors who purchase exchange-traded funds (ETFs) that track the Nikkei 225.
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