Exchange Traded Funds (ETFs)

Investing in the Euro Zone

European markets have consistently underperformed the United States for several years, but it seems as if a revival is now taking place. One way to invest in companies from a large number of countries in the Euro zone is through the WisdomTree Europe Hedged Equity ETF (HEDJ).

The term “Euro zone” refers to European countries that use the euro as their national currency, meaning that countries such as France, Germany, Greece, Italy and Austria are included under this umbrella. As a whole, the Euro-zone economies are gaining strength, with 2016 representing the first time since the 2008 financial crisis that the Euro zone’s gross domestic product (GDP) grew at a faster rate than the United States’ gross domestic product (GDP), with growth of 1.8% versus 1.7%, respectively.

Originally created in 2009, HEDJ seeks to provide investors with exposure to a broad range of Euro-zone equities and companies, many of which pay dividends. While HEDJ offers access to the entire Euro zone, the fund is primarily invested in Germany, 25%, France, 24%, Spain, 19%, and the Netherlands, 16%. The industrial, consumer discretionary, consumer staples and financial sectors make up the majority of HEDJ’s allocated investments, at a little more than 66% of total assets.

As a hedged fund, HEDJ strives to mitigate currency fluctuations of the euro relative to the U.S. dollar.

Although the fund is only eight years old, HEDJ has become a popular exchange-traded fund (ETF), currently boasting about $9.6 billion in net assets. When compared to broader European ETFs, such as the Vanguard FTSE Europe ETF (VGK), HEDJ has outperformed nicely over the course of the past year. Year to date, HEDJ is up close to 8%, better than the roughly 6% rise in the S&P 500.

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This fund has a moderate expense ratio of 0.58% and a respectable yield of 2.63%. Its top five holdings include Telefonica S.A., 5.84%; Banco Bilbao Vizcaya Argentaria S.A., 5.42%; Banco Santander S.A., 4.74%; Siemens A.G., 4.73%; and Daimler A.G., 4.58%.

Keep in mind that 2017 looks to be an uncertain year for the euro, as several countries, including France, potentially could abandon the European Union. As such, investing in European countries right now involves a degree of risk, but this may be counterbalanced by the fact that investing internationally offers just as much appeal as investing domestically for the first time in a while.

If you are interested in taking a broad swipe at prominent European countries and equities, then the WisdomTree Europe Hedged Equity ETF (HEDJ) could be a good place to start.

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.