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

Zacks

The WisdomTree Japan SmallCap Dividend Fund (DFJ) made its debut on 06/16/2006, and is a smart beta exchange traded fund that provides broad exposure to the Asia-Pacific (Developed) ETFs category of the market.

What Are Smart Beta ETFs?

Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.

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

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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.

This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.

Fund Sponsor & Index

DFJ is managed by Wisdomtree, and this fund has amassed over $897.45 M, which makes it one of the larger ETFs in the Asia-Pacific (Developed) ETFs. Before fees and expenses, this particular fund 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

When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.

Annual operating expenses for this ETF are 0.58%, making it one of the more expensive products in the space.

The fund has a 12-month trailing dividend yield of 1.80%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

When you look at individual holdings, Sankyo Co Ltd accounts for about 0.83% of the fund's total assets, followed by Matsui Securities Co Ltd and Dic Corp.

The top 10 holdings account for about 5.98% of total assets under management.

Performance and Risk

The ETF has lost about -10.29% and is down about -7.83% so far this year and in the past one year (as of 11/29/2018), respectively. DFJ has traded between $68.19 and $85.46 during this last 52-week period.

DFJ has a beta of 0.60 and standard deviation of 13.80% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 820 holdings, it effectively diversifies company-specific risk.

Alternatives

WisdomTree Japan SmallCap Dividend Fund is an excellent option for investors seeking to outperform the Asia-Pacific (Developed) ETFs segment of the market. There are other ETFs in the space which investors could consider as well.

WisdomTree Japan Hedged Equity Fund (DXJ) tracks WisdomTree Japan Hedged Equity Index and the iShares MSCI Japan ETF (EWJ) tracks MSCI Japan Index. WisdomTree Japan Hedged Equity Fund has $4.83 B in assets, iShares MSCI Japan ETF has $16.66 B. DXJ has an expense ratio of 0.48% 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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WISDMTR-JP SC D (DFJ): ETF Research Reports
 
ISHARS-JAPAN (EWJ): ETF Research Reports
 
WISDMTR-J HEF (DXJ): ETF Research Reports
 
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Zacks Investment Research