As we round out the year, exchange traded fund investors should take a look at how they are positioned and begin thinking about any adjustments they should make going into the new year.
For 2015, investors may consider including a hedged Europe strategy to capture a growing Eurozone while diminishing currency risks, diversify with the relatively cheap emerging markets, and protect against bad turns with a short-duration bond fund.
For starters, something like the WisdomTree Europe Hedged Equity Fund (NYSEArca: HEDJ) can provide investors with a more pure exposure to moves in the Eurozone by diminishing the negative effects of a depreciating euro currency.
The ETF hedges against the euro currency and would outperform a non-hedged Europe equity ETF if the euro currency depreciates. Potential investors should note that these ETFs could underperform a non-hedged ETF in the event the euro strengthens. [Why Invest in Europe ETFs]
So far this year, the euro has depreciated 9.6% against the U.S. dollar. Meanwhile, the iShares MSCI EMU ETF (NYSEArca: EZU), which tracks company stocks from the European Monetary Union and does not hedge against currency risks, has declined 4.1% year-to-date, whereas HEDJ has gained 6.8%.