International ETFs That Dodge Europe
December 22nd, 2011 at 8:30am by Tom Lydon
Overall market uncertainty and the debt problem in Europe may have investors wary of global stock exposure. However, there are international exchange traded funds that carve out Europe for investors who are worried about the debt crisis worsening.
“International equities tend to be more volatile than U.S. equities, especially in the short-term, due to currency effects.” Patricia Oey for Morningstar wrote. “Over the past three years certain categories within international equities have experienced high volatility, but strong performance as well.” [ETF Chart of the Day: Global Funds]
Global equities and ETFs have been bounced around in 2011 as the ongoing debt crisis in Europe has not let up and the rest of the globe is waiting on a resolution. As many global ETFs have fallen from their 2011 highs, some investors are value hunting. [ETF Chart of the Day: Dividend Funds ]
Morningstar recommends the following funds that have lower volatility due to low exposure to Europe. The reference point that was used for comparison was the MSCI ACWI ex-US which has 50% exposure to European stocks. A dividend screen was used as a mark of quality and good management.
- WisdomTree International Small Cap Dividend (NYSEArca: DLS) With a low 38% rate of European stock exposure, the ETF is even more attractive with a 4.2% yield. The high exposure to small-caps ensures that growth opportunity exists and the correlations are lower to U.S. stocks.
- First Trust Dow Jones Global Select Dividend (NYSEArca: FGD) A 20% weighting in U.S. stocks is a plus, and there is no exposure to European markets. The current yield is 4.8%. [ETF Spotlight: (FGD)]
- iShares MSCI Pacific ex-Japan (NYSEArca: EPP) A good way to avoid Europe is by investing in an Asian-themed fund. Holdings are dominated by Australia and Hong Kong, with a small portion of assets, at 11%, given to China. Buyer beware, while China represents a small portion of this ETF, the country itself influences a large portion of the region’s export market. [Emerging Market ETFs Get Boost From Consumer Base]
Tisha Guerrero contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.