ETFs for Betting on European Stock Markets

Joel Anderson  |

Europe stocks could be viewed as largely overlooked in this day and age. A quick look over the most actively-traded equities ETFs shows that European stocks lag way behind. Those investors looking overseas for their investment options tend to favor sexier emerging markets plays. But that doesn’t mean there aren’t still reasons to look across the pond when investing.

Europe Stocks ETFs Underperform American, Global Markets in Recent Years

The most popular ETF for European equities, the Vanguard FTSE Europe ETF (VGK) , just barely ekes into the top 50 ETFs by average daily volume, coming in at 49. This puts it well behind dozens of different equities ETFs for Brazil, Japan, China, and a variety of other regions around the globe.

It’s not hard to see why, though. European equities routinely underperform their American counterparts, and they lack the potential for exploding growth that underlies riskier emerging market investments. The VGK has only gained about 14.75 percent this year, while the SPDR S&P 500 ETF ($SPY) has gained almost 26 percent over that same period.EWU


And while the iShares MSCI Emerging Markets Index ETF (EEM) has lost almost 7 percent this year amid concerns about how American monetary policy might shift, it’s still a much better play over time. Over the last five years, EEM is up almost 66.75 percent to VGK’s gains of just under 42 percent. And over the same period, the SPY has more than doubled in value, making it unclear what value one might really find in Europe stocks.

Buy Into a Eurozone Rebound?

So why make a Euro stock play? The SPY is arguably a less risky investment that still provides much better returns. What’s more, much of the benefit of a growing European economy is going to be felt by manufacturers in the previously mentioned emerging markets.

However, that doesn’t mean that investing in Europe stocks can’t have its benefits. And there’s a variety of intriguing plays available based on how one sees the global economy shifting. Will a tapering of quantitative easing strengthen the dollar and boost European export markets? Is Europe due for a bounce-back from its debt crisis in 2011? Has the extended run for the S&P 500 pushed the value of American equities too high, making Europe stocks a bargain by comparison?

For those investors bullish on Europe, there are a number of ETFs available to make your play:

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Vanguard FTSE Europe (VGK)

Index: FTSE Developed Europe Index

Expense Ratio: 0.12 percent

The most actively traded ETF for European stocks, it covers a broad look at large-cap equities in developed European economies.


Index: MSCI EMU Index

Expense Ratio: 0.52 percent

Another ETF broadly covering European equities in Euro Zone countries.

iShares MSCI Germany Index ETF (EWG)

Index: MSCI Germany Index

Expense Ratio: 0.51 percent

Tracks the German equities market.

iShares MSCI UK Index ETF (EWU)

Index: MSCI United Kingdom Index

Expense Ratio: 0.52 percent

The United Kingdom remains on the British pound, eschewing the Euro and presenting a different opportunity than many other European equities ETFs.


Index: Euro STOXX 50 Index

Expense Ratio: 0.29 percent

A subset of the popular STOXX Europe 600 Index, the STOXX 50 Index covers approximately 60 percent of the larger index’s free-float capitalization.

There are also several ETFs tied to other nation-specific MSCI indices, including the iShares MSCI Italy Index Fund (EWI) , the iShares MSCI Spain Index Fund (EWP) , the iShares MSCI France Index Fund (EWQ) , the iShares MSCI Switzerland Index Fund (EWL) , the iShares MSCI Netherlands Index Fund (EWN) , the iShares MSCI Sweden Index Fund (EWD) , and the iShares MSCI Austria Index Fund (EWO) among others.


DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not necessarily represent the views of Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to:


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