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9 Investment Options For Traders Looking To Add Europe To Their Portfolio

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9 Investment Options For Traders Looking To Add Europe To Their Portfolio

With the U.S. Federal Reserve considering a rate increase in December, investors are starting to become jittery as fears about a market-wide slide increase.

The uncertainty weighing on U.S. markets has caused many to begin looking further afield to regions like Europe, where the European Central Bank is moving in the opposite direction. In an effort to combat a stalling economy, the ECB has pledged to continue injecting funds into the region's financial system until things normalize and the continent returns to growth.

That means while U.S. firms struggle with higher debt costs and a stronger dollar, European firms will be poised for growth with more borrowing power and accommodative monetary policies. For many traders, adding Europe to their portfolio is a no-brainer, but deciding just how to invest poses a more difficult question.

Here's a look at 9 investment options for traders who want to add Europe to their portfolio.

Related Link: Don't Forget These International Small-Cap Dividend ETFs

Invest In Europe As A Whole

  • BlackRock European Dynamic Fund
  • The BlackRock European Dynamic Fund is an ETF that gives investors exposure to a variety of companies listed in Europe from a wide range of EU nations, with the exception of the UK.

    The fund significantly outperformed the FTSE World Europe benchmark over the past year, with BlackRock posting 9 percent total returns and the FTSE World Europe benchmark falling 1.21 percent.

    The fund allocates its investment primarily in Germany and Switzerland, and more than 40 percent of the companies making up BlackRock's fund are from the financial and healthcare sectors.

  • Vanguard FTSE Europe ETF (NYSE: VGK)
  • Perhaps the most widely known ETF among investors interested in Europe is the FTSE Europe ETF offered by Vanguard.

    The fund tracks the broad performance of European stocks and includes a variety of countries and companies. While the fund encompasses several European nations, 32.2 percent is allocated to the UK and France, with Switzerland and Germany making up another roughly 40 percent of the fund's allocation.

    Much like BlackRock, 23 percent of VGK is invested in the financial sector, but the consumer goods industry makes up the next largest allocation at 18.1 percent.

    The fund has lost 5.36 percent over the past year amid all of Europe's financial issues, but some see the decline as a good time to buy as prices are lower.

    Regional ETFs

  • iShares MSCI United Kingdom ETF (iShares Trust (NYSE: EWU))
  • For traders looking to dive a little bit deeper into European investments, funds that track the economic performance of specific regions could be a good bet.

    iShares MSCI United Kingdom ETF gives investors exposure to both large- and mid-sized firms in the UK. The fund includes companies like HSBC Holdings PLC, British American Tobacco PLC and BP PLC – all of which are based in the UK.

    Over the past year, the fund has closely mirrored the MSCI United Kingdom Index and lost 6.59 percent; but for investors expecting to see the UK prosper in the coming years, now could be a good time to buy.

  • iShares MSCI EMU Index (ETF) (NYSE: EZU)
  • Another regional ETF that has been a popular choice for investors is the iShares MSCI Eurozone ETF. The fund allocates the majority of its exposure to the eurozone's two largest economies, France and Germany. The fund also includes companies based in Spain, the Netherlands, Italy, Belgium, Finland and Ireland, and invests in firms like Bayer AG, Total SA, Sanofi SA and Anheuser Busch Inbev SA.

    So far this year, the fund is down 1.36 percent, but investors who believe that eurozone firms are positioned for recovery may still be interested in adding EZU to their portfolios.

    Related Link: Using Diversified ETFs For European Small-Cap Exposure

    Country Specific ETFs

  • iShares MSCI Germany Index Fund (ETF) (NYSE: EWG)
  • For those who want to target an even smaller group of EU companies, there are country-specific ETFs that track firms operating in a particular European nation.

    The iShares MSCI Germany Index Fund is one such product that provides investors with exposure to large and mid-sized firms within the German Market. As Germany is the eurozone's largest economy and tends to be considered the most stable, EWG is a popular choice for investors that are looking for long-term growth.

    Nearly 40 percent of the fund's allocation is in the consumer discretionary and financial sectors and Bayer AG is EWG's largest holding.

    The fund has increased 24.62 percent over the past five years, but political and financial issues throughout the region have weighed heavily in the past year, bringing the fund down 3.8 percent.

  • iShares MSCI Spain Capped ETF (NYSE: EWP)
  • For investors with more of a stomach for risk, country specific ETFs that provide exposure to those nations that have been most affected by the region's financial crisis could provide the best opportunities for growth.

    iShares MSCI Spain Capped ETF provides exposure to large- and mid-sized companies in Spain and tracks the Spanish stock market. While political problems in the nation may become an obstacle for growth, Madrid is expected to reap the benefits of the ECB's stimulus efforts, something that could boost the nation's market in the coming year.

    Among the top holdings in EWP are Banco Santander SA and Banco Bilbao – 40.37 percent of the fund's allocation is in the financial sector. So far this year, the fund has fallen 12.62 percent, leaving many to wonder whether a swing in the opposite direction is on its way.

    Related Link: Making A Deposit With The European Bank ETF

    Individual Stocks

  • Daimler AG (OTC: DDAIF)
  • While stock picking is infinitely more difficult and poses more risk than investing in an ETF, many investors are lured in by the higher returns that individual companies' shares could offer.

    For investors looking to do a bit more research and choose individual eurozone companies, automaker Daimler AG is a popular choice. The company is behind the luxury Mercedes-Benz vehicles that are well known across the globe. Not only is Daimler based in one of the eurozone's most stable countries, Germany, but the firm is likely to benefit from a weaker euro, as its cars will become more competitive within the global market.

    Goldman Sachs recently reaffirmed its Buy rating for Daimler shares, and most analysts are expecting to see EPS of $8.01 for the current fiscal year.

  • Ryanair Holdings plc (ADR) (NASDAQ: RYAAY)
  • European discount airline Ryanair has proven to be a resilient company over the past five years, with its shares delivering 159.23 percent despite the financial downturn and increased pressure on the airline industry.

    In September, the company increased its full-year guidance by 26 percent, saying that it expects passenger traffic to continue rising as its low-fare model continues to grab more of the market. While the stock's impressive performance in recent months has made it a more expensive buy, many point to the company's success and sound financials as reason to make a long-term investment. Additionally, the airline industry has the potential to benefit from the eurozone's recovery in the coming years, as lower unemployment figures will give consumers more purchasing power, which could in turn boost travel.

  • Koninklijke Philips NV (ADR) (NYSE: PHG)

    Technology firm Koninklijke Philips is another popular buy among investors looking to pick up individual stocks from Europe.

    Based in Amsterdam, the firm operates across several sectors, including healthcare and consumer products. The company is set to debut a new wearable device that will track biometrics and help "prevent lifestyle induced chronic conditions" as well as new blood pressure monitors, body analysis scales and ear thermometers that blur the line between medical devices and consumer products.

    As the public becomes increasingly more interested in health-tracking technology, Philips could be a name to watch in the wearables space. Not only that, but the firm will benefit from a weaker euro, as its products will become more competitive across the globe.

    Image Credit: Public Domain

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