Exchange Traded Funds (ETFs)

European ETF Offers Array of Prominent Companies

This week’s ETF Talk will be the first of five highlighting exchange-traded funds (ETFs) that invest in European companies. While these funds have different strategies, the one we will focus on today is the broadest: the Vanguard FTSE Europe ETF (VGK).

This fund invests in large companies in Europe’s most developed and significant economies. This focus means that a majority of Europe’s westernmost countries are well represented by the fund, along with countries located in the Scandinavia region of Europe.

VGK holds a selection of the most well-known, European-based companies you can find, and offers relatively low-risk exposure to big names in the region. For investors seeking a simple way to invest in Europe, this fund may be an attractive option.

VGK has a very low expense ratio, which currently clocks in at just 0.10%. Because many large European companies pay substantial dividends to their shareholders, VGK sports a 3.42% yield and makes dividend payments every quarter. Net assets total $10.9 billion.

As the below chart demonstrates, this fund had mixed performance over much of the last 12 months. However, international equities are on the rise again, and VGK has done better in the last couple of months as a result. VGK is up 5.38% since January.

Due to its weighting strategy, VGK’s funds are not all that concentrated in its top holdings, with just 17% invested in its top 10 largest positions. Among them are Nestle SA, Royal Dutch Shell plc, Novartis AG, Roche Holding AG and HSBC Holdings plc. These prominent names should be familiar to a globally oriented investor.

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The countries most strongly represented here are the United Kingdom, at 30%, and Germany, France and Switzerland, which take up about 14% each.

If investing in big and bright European stocks seems like a good move to you right now, the Vanguard FTSE Europe ETF (VGK) could be a fine starting point for your research.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Successful Investing, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.