Why invest in Europe?
Western Europe is more than the home to the Eiffel Tower, Buckingham Palace and the Parthenon. It’s also home to leaders in banking, beer, big pharma and energy.
In fact, some of the biggest and oldest companies in the world are located in Europe’s most developed nations, which include the United Kingdom, France, Germany, Italy, and Switzerland.
Why invest in Europe now?
At Stash we believe in a diversified portfolio. In addition to owning U.S. stocks, you may want to consider owning some European stocks, among other regions around the globe.
Check out: Global Diversification: What Is It?
Numerous economists and other financial experts believe the value of U.S. stocks may be too high.
The opposite may be true of Europe, which over the last couple of years has emerged from its own recession, with stocks that could be poised for growth.
Furthermore, the defeat of populist extremist Marine Le Pen’s presidential bid in France gave investors a renewed faith in the euro zone — that’s the name for the 19 countries joined together by the common currency called the euro.
Quick facts: There are 28 countries in the European Union. Not all of them use the euro as their currency. Le Pen had vowed to take France out of the EU, and off the euro if she won.
Le Pen’s loss to the more euro and EU-friendly Emmanuel Macron has signaled steadier times ahead for France and for global investors.
In addition to developments in France, Germany has been leading the way, powering the region’s growth with increases in exports, construction, and equipment spending.
Essential Europe ETF: What’s inside the fund?
*The numbers above reflect the percentage of stock holdings from each country in the fund.
- 29% United Kingdom
- 15% Germany
- 15% France
- 14% Switzerland
- 5% Spain
Top companies in the portfolio include Nestle, the Swiss maker of chocolate bars and breakfast cereals, and pharmaceutical companies Roche and Novartis, as well as the beer manufacturer Anheuser-Busch. Royal Dutch Shell, the petroleum producer, and transnational consumer products company Unilever are also part of the mix.
The index is developed and managed by Vanguard. There are more than 1200 stocks in the fund. If you want a complete list, you can find the companies here.
Investing in Europe: What are the risks?
Risks to investing overseas include political turmoil and currency fluctuation, which can affect your portfolio’s value.
Brexit, the term coined for the UK’s imminent departure from the EU following its referendum last June, is on the horizon. No one knows for sure what impact that will have on Europe, and the UK, whose capital city London is considered the financial hub of Europe.
(Remember: this ETF’s biggest holdings are in UK-based companies, including financial services company HSBC.)
- The fund invests in large companies from developed European nations.
- The U.K. is the country with the greatest number of investments in this fund, which could create risk.
- The euro zone is poised for growth, according to some financial experts, and could create an opportunity for investors, compared to the U.S. economy.
Keep reading: Emerging Market vs. Developing Market