Four ways Japan disaster affects investors

When the world’s third-largest economy is hit with its worst earthquake ever, a tsunami, and a subsequent nuclear crisis, the human and physical toll has been enormous. The disaster is also sending ripples through the world economy. Here is a look at four ways the Japanese crisis changes the investment landscape:

1. Japan’s now an opportunity

Eugene Hoshiko/AP
A man looks at a stock price board in a street March 15, 2011, in Tokyo, when Japan's Nikkei stock index nose-dived nearly 11 percent. Other Asian markets also tumbled.

If you are already invested in Japan, analysts suggest that you hang tight. If you're not invested, what are you waiting for? The historically cheap valuations of Japanese stocks present a compelling buying opportunity from both a crisis and secular perspective. If you are anxious about getting in too soon, remember that injecting money into the stock market actually helps the Japanese economy.

While additional price volatility is likely as Japan grapples with the tragic human losses as well as physical destruction, at some point it will begin rebuilding, which should allow the economy to rebound slowly after a decade of very little economic growth and two decades of stagnation for Japan’s equity markets.

How can you play this? Exchange-traded funds are one attractive way for investors in the United States to put their dollars to work overseas. A rule of thumb: Use ETFs that track a major index. Picking individual stocks when investing internationally is better left to sophisticated investors with knowledge of the local market.

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