A comparison of the Nikkei 225, TOPIX and the Yomiuri 333 stock index. Yomiuri 333 is rebalanced to an equal 0.3% weighting for each stock and is said to have remained more stable than the other indices based on 40 years of data.
The top 4 constituents of the Nikkei 225 account for approximately 37% of its weighting, leading to concerns that what is intended as diversified investing can easily become concentrated investing. TOPIX, meanwhile, is weighted by market capitalisation and tends to be dominated by financial and automotive-related stocks.
Yomiuri 333 comprises 333 stocks at an equal weighting of 0.3% each and uses an automatic contrarian mechanism that restores the weightings through rebalancing 4 times a year. Analysis of data from the past 40 years indicates that it did not underperform the Nikkei 225 or TOPIX and was comparatively resilient during market declines.
Assuming equal one-third investments in the 3 indices, Yomiuri 333 is said in some cases to have the most stable average returns of the 3 and the highest risk-adjusted return. Within the Children's NISA allowance, investors may also consider using a Yomiuri 333-linked investment trust.
In summary, the Nikkei 225 tends to be concentrated in its largest constituents, TOPIX is centred on financial and automotive stocks, and Yomiuri 333 is said to offer greater stability through equal weighting. A strategy of investing equally in the 3 indices over the long term may therefore be considered.