Does your portfolio need European share exposure? Vanguard FTSE Europe Shares ETF (ASX: VEQ) could be the answer.
What is Vanguard?
Vanguard is a funds management business that is owned by its own investors. It was founded in 1975 and now has (or had) around AU$9.7 billion. It has 192 funds in the US, and 232 funds in markets outside the US. It’s a world leader in providing low-cost ETFs.
Why choose Vanguard FTSE Europe Shares ETF?
There are plenty of ETFs out there that give investors exposure to European shares like Vanguard MSCI Index International Shares ETF (ASX: VGS) and Vanguard All-World ex-U.S. Shares Index ETF (ASX: VEU).
However, if you go for one of those global ETFs then you’re indirectly in a lot of regions you may not want to. Perhaps you just want European shares, not ones listed in North America or Asia.
You may have particular concerns about the trajectory of the US with COVID-19 or the election later this year. Maybe you don’t have a lot of confidence in the Asian market and don’t want exposure to Hong Kong or China shares.
Europe does have quality shares
The US share market is dominated by Microsoft, Facebook, Amazon, Alphabet and Apple. If it weren’t for those big five global tech shares then the performance different wouldn’t look as much.
The top 10 holdings of Vanguard FTSE Europe Shares ETF are: Nestle, Roche, Novartis, AstraZeneca, ASML, SAP, Novo Nordisk, Sanofi, LVMH and GlaxoSmithKline.
Some might say it is a little ironic that in Europe, where healthcare is accessible across the continent, it’s actually healthcare shares that feature the most as the biggest holdings.
A few of the biggest businesses are recognised as world leaders like luxury company LVMH Moet Hennessy Louis Vuitton, software business SAP and semiconductor business ASML.
Other facts to be aware of
Vanguard FTSE Europe Shares ETF has an annual cost of 0.35%. This is cheap compared to most investment fund managers, but fairly expensive compared to an ETF like Vanguard All-World ex-U.S. Shares Index ETF.
The ETF is capable of producing good returns, it has just been unfortunate in recent years with Brexit and the global pandemic. In 2017 the ETF made a 17.36% return and in 2019 it made a 24.47% return.
It could also be a decent future dividend idea with a (trailing) dividend yield of 3.6%.
If you only want exposure to Europe then this could be one of the best ETFs to do your European investing.