Which Japanese Stock Index Should You Buy: Nikkei or TOPIX?

I know many of you do not have direct access to Japanese stocks, but as you are reading this, you clearly want to invest in the Japanese economy.

I have some great news for you: Almost all stock-brokers provide index funds in Japan’s biggest indexes,,the Nikkei 225 and the TOPIX.

These are indexes of the most valuable companies in Japan, and are basically the Japanese versions of the American S&P 500 and Dow Jones Indexes.

Funds following these indexes are so-called “passive funds”, as all they do is automatically buy and sell stocks based solely on if they are added or removed from these indexes. Hence, there are no overpaid fund managers who charge fees for their services and so owning them tend to cost close to zero in fund fees.

So, what is the difference between the Nikkei 225 and the TOPIX, and which one should you invest in?