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(Virginia Mayo/Virginia Mayo/Associated Press)
(Virginia Mayo/Virginia Mayo/Associated Press)


How to invest in Western Europe using ETFs Add to ...

Western Europe equity markets have been exceptionally volatile in recent weeks. German and French markets have been buoyed by news of stronger-than-anticipated economic growth. Other equity markets, including Greece, Ireland and Portugal, have struggled due to weakening economies, rising inflation and employment rates and increasing sovereign debt risk.

North American investors have a variety of ways to invest in Western Europe equity markets. The most practical way to invest either in individual countries or in the entire region is through exchange traded funds.

The easiest way to invest in the entire region is to own iShares Europe 350 Index . The Index is based on 350 big-cap European based companies. Most are companies that offer products and services to international markets. Largest percent positions in the Index, based on country of origin, are United Kingdom (32.8), France (15.4), Switzerland (12.9) and Germany (12.3). Largest percent sector weights are financial services (21.5), consumer staples (12.4) and industrials (11.0). Management expense ratio is 0.60 per cent.

Investors looking to invest in Euro zone companies, that exclude companies based in the United Kingdom, will prefer to invest in iShares MSCI European Monetary Union Index . The Index is based on 274 big cap companies that use the Euro as a basis for reporting results. Largest percent positions in the Index based on country of origin are France (30.9), Germany (28.1), Spain (11.5), Italy (9.0) and Netherlands (8.6). Largest percent sector weights are financial services (22.4), industrials (13.3), consumer discretionary (11.6) and materials (9.4). Management expense ratio is 0.54 per cent.

Each individual country has an exchange traded fund that approximately simulates its major equity index. For example, iShares on the United Kingdom Index has a high correlation with the London FT Index, iShares on the German Index has a high correlation with the Frankfurt DAX Index and iShares on the French Index has a high correlation with the Paris CAC Index. All of these ETFs have a management expense ratio of 0.52 per cent.

Following is a list of exchange traded funds for major western European countries:

iShares MSCI Austria

iShares MSCI Belgium

iShares MSCI France

iShares MSCI Germany

iShares MSCI Ireland

iShares MSCI Italy

iShares MSCI Netherlands

iShares MSCI Spain

iShares MSCI Sweden

iShares MSCI Switzerland

iShares MSCI United Kingdom

iShares ETFs are not available for Portugal or Greece.

European equity markets have two periods of seasonal strength: from the end of February to the end of April and from the end of October to the end of December.

Chart courtesy of www.equityclock.com

Don Vialoux is the author of free daily reports on equity markets, sectors, commodities and Exchange Traded Funds. He is also a research analyst for JovInvestment Inc. Reports are available at www.timingthemarket.ca and www.equityclock.com. Follow him on Twitter @EquityClock.

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