There are a couple of important reasons why Canadian investors might want to invest in European stocks.
First of all, we’re too focused on assets located close to home. Many have almost all of their portfolio in Canadian dollars. And if they diversify, the default choice is always to invest in U.S. securities. A lot of people would benefit from exposure outside of North America.
Many European markets are also cheap. Stock markets in the U.K., Italy, Norway, Spain, and Portugal are trading at discounts versus valuations here in North America. Emerging European markets like Poland, Russia and the Czech Republic are even cheaper.
There are a couple of ways Canadian investors can easily invest in European markets.
The first way is through the First Asset MSCI Europe Low Risk Weighted ETF (TSX:RWE). An unhedged version of the same ETF also exists.
This ETF is relatively small with a market cap of just $38 million and average daily trading volume of just 2,400 shares. It has a management fee of 0.60% and pays a trailing dividend of more than 2%.
Top holdings include German-based MAN SE, which is a supplier of trucks, buses, and diesel engines, and the consumer products giant Nestle.
The other way for Canadians to invest in Europe is the Vanguard FTSE Developed Europe ETF (TSX:VE), which has a market cap of $108 million and average daily trading of nearly 10,000 shares.
It also has a yield of more than 2% and top holdings include Royal Dutch Shell, Nestle, and Novartis. It has a very attractive 0.22% management-expense ratio as well.
