Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
FEU is invested in the largest of large companies in Greater Europe(split about a third to the UK and the rest to Europe). I was indeed surprised with it's dividend, Wow! And, it is currently selling towards its 52 week low. For me, I'd position cost average into the position. First, I'd determine how much I currently have in equities along with how much I already have invested in Greater Europe. Currently, within my own portfolio I am weighted a little better than the 20% range in Greater Europe ... and, if I wanted to raise this exposure to say about 25% then I'd ease into FEU until I reached my desired allocation. In this way, if some of my global equity and global allocation fund managers also move towards Europe then I could possible wind up with more than I first wanted if you load with a one time bulk purchase. After all, what are you going to do if it is a while before Europe starts to move or even continues to decline? So again, I'd average in. Indeed, you are catching a good dividend while you build the spiff out and while held.
I think Asia is at least as attractive as Europe, so I'd go with a good foreign, mostly developed-market fund, preferably currency-hedged. For Europe alone, there are hedged options out there like HEDJ.
I have a couple of related questions. Wisdom Tree's hedged ETFs for both Europe and Japan, HEDJ and DXJ, respectively, are focused on dividend paying companies, so a value tilt I guess, but also on companies that derive more than 50% of revenue outside of Europe and at least 20% of revenue outside of japan. Both ETFs weight their holdings based on dividends rather than market cap.
First question is whether you'd be concerned that you're not getting a real European investment if the companies have to be big enough to derive more than half their revenue elsewhere. I guess the good side is that if you're betting on the ECB then exporters will get the benefit of a weaker EUR.
The approach Wisdom Tree takes also favors big companies, but if you use the US as a proxy for QE then you'll find the Russell 2000 has done better than the S&P 500 from the start of 2009 until the end of 2013. Clearly small-caps have not kept up this year, but the better performance has come from the smaller companies. I'm not sure the difference is significant enough for the effort it would require to hedge small-cap investments in Europe or Japan, but wondered what others thought about small-cap vs. large-cap in the context of QE for Europe and/or Japan.
There are also hedged ETFs that are market cap based as an alternative to dividend weighting, but I guess that is a separate discussion based on what you believe about the sectors that tend to pay more dividends.
I would be inclined to used a currency hedged fund as well, as @AndyJ noted. For whatever the "magic" reason (we may call it intervention by the powers), the Euro has finally began its decline against the U.S. dollar. Not just that the dollar is so strong, but during the past several weeks the Euro is being allowed to devalue against the dollar.
---FEU YTD= - 6.6%,vs +6.1% for HEDJ --- " E.R.= .29, vs .58 for HEDJ ---FEU yield=2.7% SEC (trailing 12 month is 5.4%) HEDJ = 0%
To each there own, of course; regarding currency hedging.
We remain U.S. centric for equity and bond holdings. But, watching......yes, I do believe 2015 is going to be very interesting....Euro (more decisions), cheap energy, Russia, change of power in the Saud family???, huh, even problems in Libya has not placed a dent in crude pricing, continuing problems in parts of South America. Others for this list, too.
All of this should drive Josh Brown partially crazy for 2015, based upon the post regarding Mr. Brown.
DBEU is another hedged option. Its weighted by market cap, and maybe more importantly it includes Switzerland and the UK (46% of the portfolio). I'm not sure how stocks in Switzerland and the UK are valued compared to the Eurozone, but my guess would be that they're not as good a value and if you're betting QE in Europe including an economic recovery and multiple expansion, the cheaper Euro won't help the exporters priced in GBP or CHF.
It appears to me than any attempt to have a pure European play means small caps. Looking at the holdings of FEU, they are mostly global corporations and many are companies most of us have in our funds already like Glaxo, Nestle, etc, these being the Euro licensed corporations of such.
It would be interesting to figure out what percentage of the SP500 other indexes have European exposure built into them.
Comments
FEU is invested in the largest of large companies in Greater Europe(split about a third to the UK and the rest to Europe). I was indeed surprised with it's dividend, Wow! And, it is currently selling towards its 52 week low. For me, I'd position cost average into the position. First, I'd determine how much I currently have in equities along with how much I already have invested in Greater Europe. Currently, within my own portfolio I am weighted a little better than the 20% range in Greater Europe ... and, if I wanted to raise this exposure to say about 25% then I'd ease into FEU until I reached my desired allocation. In this way, if some of my global equity and global allocation fund managers also move towards Europe then I could possible wind up with more than I first wanted if you load with a one time bulk purchase. After all, what are you going to do if it is a while before Europe starts to move or even continues to decline? So again, I'd average in. Indeed, you are catching a good dividend while you build the spiff out and while held.
Old_Skeet
First question is whether you'd be concerned that you're not getting a real European investment if the companies have to be big enough to derive more than half their revenue elsewhere. I guess the good side is that if you're betting on the ECB then exporters will get the benefit of a weaker EUR.
The approach Wisdom Tree takes also favors big companies, but if you use the US as a proxy for QE then you'll find the Russell 2000 has done better than the S&P 500 from the start of 2009 until the end of 2013. Clearly small-caps have not kept up this year, but the better performance has come from the smaller companies. I'm not sure the difference is significant enough for the effort it would require to hedge small-cap investments in Europe or Japan, but wondered what others thought about small-cap vs. large-cap in the context of QE for Europe and/or Japan.
There are also hedged ETFs that are market cap based as an alternative to dividend weighting, but I guess that is a separate discussion based on what you believe about the sectors that tend to pay more dividends.
For whatever the "magic" reason (we may call it intervention by the powers), the Euro has finally began its decline against the U.S. dollar. Not just that the dollar is so strong, but during the past several weeks the Euro is being allowed to devalue against the dollar.
---FEU YTD= - 6.6%,vs +6.1% for HEDJ
--- " E.R.= .29, vs .58 for HEDJ
---FEU yield=2.7% SEC (trailing 12 month is 5.4%) HEDJ = 0%
FIDO compositon view for HEDJ Other details may be selected from the list on the left edge.
To each there own, of course; regarding currency hedging.
We remain U.S. centric for equity and bond holdings. But, watching......yes, I do believe 2015 is going to be very interesting....Euro (more decisions), cheap energy, Russia, change of power in the Saud family???, huh, even problems in Libya has not placed a dent in crude pricing, continuing problems in parts of South America. Others for this list, too.
All of this should drive Josh Brown partially crazy for 2015, based upon the post regarding Mr. Brown.
Take care,
Catch
Thanks for mentioning the "deutsche X-trackers". They have some interesting product lines, too.
It would be interesting to figure out what percentage of the SP500 other indexes have European exposure built into them.
Link to FEU's assets:
http://portfolios.morningstar.com/fund/holdings?t=FEU®ion=usa&culture=en-US