ETF Talk: Global Fund Offers Broad Exposure

Doug Fabian

Doug Fabian is known for his expert knowledge of ETFs, bear funds and enhanced index funds to profit in any market climate.

Investing has been challenging for just about everyone so far this year. Sudden stock market pullbacks, economic setbacks, banking system problems and political change all have contributed to the tough market milieu. Since such risks likely will continue throughout the rest of the year, a diversified international fund is one way to hedge your investment bets across a broad cross-section of large public companies around the world. One global fund that you may want to consider is the Vanguard FTSE All-World Ex-US ETF (VEU), which invests in more than 2,000 companies across numerous sectors.

VEU still leaves you vulnerable to market downturns but it also spreads your risk to avoid huge hits if a particular market tanks for any reason. The fund’s recent performance has captured my attention. It closed at $42.51 yesterday, Aug. 14, up 4.73% from its opening price on Jan. 3. The fund also yields 3.22% but traditionally has paid an annual dividend in December, so you need to be patient to collect it. VEU gained momentum through the first quarter and hit a yearly high of $45.05 on March 1. The fund’s price slid to $37.65 on June 1 but it has rebounded since then. VEU now is trading above its 200-day and 50-day moving averages.

Here is a bit of additional detail about the fund. The Vanguard FTSE All-World Ex-US ETF (VEU) benchmarks the performance of the FTSE All-World Ex-US Index to track both developed and emerging world equity markets. The fund’s $12.9 billion in net assets are well allocated across eleven sectors that include financial services (20.81%), industrials (12.01%), basic materials (10.59%) and consumer defensive (10.48%). With diversification among a variety of sectors, VEU attempts to minimize potential losses. As of July 31, the fund’s top five holdings were Royal Dutch Shell PLC, Nestle S.A., BHP Billiton Ltd., Samsung Electronics Co. Ltd. and Novartis AG.

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VEU also is appealing due to its low expense ratio of only 0.18%. Still, the fund poses risks worth mentioning. Management’s placement of more than 20% of its assets in financial services stocks exposes investors to fluctuations in that volatile sector. Many banks still may have difficult days ahead as economic weakness prevents borrowers from repaying loans.

If you want my advice about buying and selling specific ETFs, including appropriate stop losses, please consider subscribing to my ETF Trader service. As always, I am happy to answer your questions about ETFs, so do not hesitate to email me by clicking here. You may see your question answered in a future ETF Talk.

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