Gaining Exposure to a Range of European Companies Through a Diversified Fund

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker, financial journalist, and money manager.

(Note: fourth in a series on European-focused ETFs)

For investors interested in gaining exposure to stocks in the developed economies of Europe, the Vanguard FTSE Europe ETF (NYSE: VGK) may be a fund well worth considering.

VGK holds a diverse and comprehensive portfolio of stocks from developed European countries. This fund is unique because, in October 2015, it shifted to a different version of its original FTSE index. The new version allows for the inclusion of smaller firms in market-like proportion, which may be appealing to investors if the quality of companies is up to par.

VGK uses an indexing investment approach and invests all, or most, of its assets in the common stocks found in the FTSE Developed Europe All Cap index. In terms of European exchange-traded funds (ETFs), VGK charges an incredibly low fee. With massive daily volume and tight spreads, it is one of the most liquid funds in its segment.

This open-ended fund has an expense ratio of 0.08% and a dividend yield of 4.12%. According to Morningstar.com, VGK has sales growth of 0.59% and $11.74 billion in assets under management. Though the fund is down year to date (YTD), it has seen a steady growth of 17.08% in the last three months. VGK, like many other funds, both American and European, has been impacted by the coronavirus and absorbed the most damage in mid-March. However, as seen in the chart below, this ETF has showed a steady upward trend, and, as of late, it has surpassed both its 50-day and 200-day moving averages and continues climbing.

Exclusive  Eww, That's Gross!

Chart courtesy of StockCharts.com.

Though VGK is an incredibly diversified fund, the majority of its holdings are in the health care sector, which makes up 16.20% of its total portfolio. Its top five holdings and their weightings in the fund’s portfolio are Nestle SA (NESN), 3.50%; Roche Holding AG Dividend Right Cert. (ROG), 2.75%; Novartis AG (NOVN), 2.07%; AstraZeneca PLC (AZN.L), 1.58% and ASML Holding NV (ASML), 1.46%.

For investors looking to broaden their holdings to include European stocks in developed economies, Vanguard FTSE Europe ETF (NYSE: VGK) may be worth examining. Its representative portfolio, low expense ratio of less than 0.10% and strong liquidity make for a strong ETF.

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.

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