Among the many ex-U.S. developed markets offering 澳洲幸运5官方开奖结果体彩网:investors solid alternatives to U.S. stocks this year is Japan. Just look at the iShares MSCI Japan (EWJ), which is up nearly 12 percent this year. That is well ahead of the 9.3 percent returned by the 澳洲幸运5官方开奖结果体彩网:S&P 500.

Like many developed markets outside the U.S., Japan's 澳洲幸运5官方开奖结果体彩网:equity market is attractively valued compared with the U.S. Additionally, the 澳洲幸运5官方开奖结果体彩网:reflation trade coupled with the weak yen are seen as 澳洲幸运5官方开奖结果体彩网:catalysts for Japanese stocks. The 澳洲幸运5官方开奖结果体彩网:Bank of Japan (BoJ) has engaged in one of the largest, most active 澳洲幸运5官方开奖结果体彩网:quantitative easing programs over the past several years in an effort to weaken the yen while stirring 澳洲幸运5官方开奖结果体彩网:inflation in Japan. Japan, the world's third largest economy behind the U.S. and China, has been in a multi-decade, mostly losing battle with 澳洲幸运5官方开奖结果体彩网:deflation. (See also: Japan's Strategy to Fix Its Deflation Problem.)

Investors should note that EWJ is not a currency-hedged 澳洲幸运5官方开奖结果体彩网:exchange traded fund (ETF), meaning it can lag the returns of rivals that hedge yen risk against the dollar during periods of the Japanese currency being weak against its U.S. rival. "This fund does not hedge its 澳洲幸运5官方开奖结果体彩网:currency exposure, so it does not provide protection from fluctuations in 澳洲幸运5官方开奖结果体彩网:foreign exchange rates between the U.S. dollar and Japanese yen," said . "This has been noticeable the past few years as the dollar has strengthened, and subsequently reduced the fund's dollar-denominated returns. Over short periods, currency fluctuations may drive dollar-denominated returns higher ꦺor lower, but should largely wash out over long stretches of time." (See also: Are Cu🍸rrency-Hedged ETFs a Good Idea?)

EWJ is more than 21 years old, and with $16.6 billion in 澳洲幸运5官方开奖结果体彩网:assets under management, the fund is one of the oldest and largest single-country ETFs. The behemoth Japan ETF tracks the MSCI Japan Index and holds 320 stocks, a significant percentage of which are 澳洲幸运5官方开奖结果体彩网:large caps. That means EWJ lacks leverage to mid- and 澳洲幸运5官方开奖结果体彩网:small-cap Japanese names, many of which can take advantage of Japan's improving domestic economy and some of which are levered to the weak yen and export story. Japan accounts for a large chunk of global equity 澳洲幸运5官方开奖结果体彩网:market capitalization, co💦nfirming its heavy tilt toward larger stocks.

澳洲幸运5官方开奖结果体彩网:Industrial and 澳洲幸运5官方开奖结果体彩网:consumer discretionary stocks combine for over 39 percent of EWJ's weight. Those are export-heavy sectors in Japan. "Small companies have historically provided higher returns than those having larger market capitalizations," said Morningstar. "These firms also tend to be more highly leveraged to the fortunes of their domestic economies than their larger counterparts, and so may offer better 澳洲幸运5官方开奖结果体彩网:diversification benefits to U.S. investors. However, they tend to have higher 澳洲幸运5官方开奖结果体彩网:volatility, and th♒e fund has been less volatile than the category average."

Japanese economic growth is improving, a theme that should benefit EWJ even with its focus on bigger companies. "The Nikkei Japan Composite PMI Output Index rose from 52.6 in April to 53.4 in May, marking the eighth successive month of expansion and the best performance since January 2014," said Markit. "Notably, the latest reading pushed the second quarter average to 53.0, up from the first quarter's mean of 52.5, and remained consistent with robust GDP growth." (See also: An International ETF Idea for Bargain Hunters.)