Quote (Bazi @ Oct 28 2020 08:10pm)
do you have any European ETFs you have shortlisted that you think are poised for success post covid? trying to do more research on German markets
The only European one I'm invested in is the Vanguard FTSE 250 UCITS ETF. I am more into buying individual stocks in Europe because I know the market better, whereas I go for more generalised index funds or ETFs outside of Europe where I have less knowledge.
I like the FTSE250 because there is more innovation in the slightly smaller companies compared to the FTSE100 and Brexit has hit their valuations harder. They are more dependent on the domestic economy whereas companies like Shell make over 90% of their revenues abroad so are well hedged against Brexit.
The DAX is probably the best index in Europe - It has good returns over the long term, it is the biggest economy in Europe, the companies in the index have decent future potential and the corporate governance is really good. Germany are heavy on manufacturing though and their economic growth is pretty negligible (much lower than the US), but that is like most of Western Europe really.
The other index worth noting is the UK's FTSE100, home to the second biggest economy in Europe with an index heavily weighted to industries of the past (energy, financials, consumer goods, mining) that experience low growth. Notice the difference in technology weighting of the FTSE100 to the world index, which is the industry doing the best in the pandemic and probably has the best growth potential long term too:
Large cap UK companies pay much higher dividend yields than the US but that's because they are either not interested or not capable of investing free cashflow into new projects. The index is down 23% YTD due to the heavy impact of coronavirus on the industries that dominate the FTSE. Add brexit which is already priced in and there is potentially a lot of upside value in there, which is making me contemplate putting some money in a FTSE100 index or increasing my position in the FTSE250 as I'm optimistic of a trade deal between the UK and the EU being agreed in the next month.
If you do invest in European markets, I'd be wary of exchange rate risk to your portfolio as I think it's more likely that the dollar will appreciate against the euro/gbp than the opposite. If you're investing significant sums maybe do a money market hedge on an ETF that will gain on USD appreciating vs euro/gbp.