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Why it makes sense to buy VEQ ETF in 2020

I believe that investors would be smart to consider investing in Vanguard FTSE Europe Shares ETF (ASX: VEQ) through the rest of 2020.

About VEQ

This ETF gives exposure broad diversification to the European share market.

It actually owns around 1,300 businesses as investments. The biggest European stock exchanges make up the largest markets within the ETF.

UK shares are almost a quarter of the ETF. The other countries with an allocation of more than 1% are: Switzerland, France, Germany, the Netherlands, Sweden, Italy, Spain, Denmark, Finland, Belgium and Norway. It truly is a European-wide ETF.

The ETF has a reasonably high cost for a Vanguard investment with an annual management fee of 0.35%.

So what European shares does the ETF actually own?

Its biggest positions are: Nestle, Roche, SAP, Novartis, Unilever, AstraZeneca, ASML, Sanofi, Royal Dutch Shell and LVMH (Louis Vuitton Moet Hennessy).

The above businesses are some of the best in the world. If I were making my own global portfolio I would like to own SAP, Unilever, AstraZeneca, ASML and LVMH. I particularly like ASML and LVMH.

Other similar ETFs

Other European-based ETFs would be the most obvious comparison such as iShares Europe ETF (ASX: IEU) and Betashares FTSE 100 ETF (ASX: F100).

How has the ETF performed?

Source: Best ETFs VEQ 5-year share price chart.

It has been a tough five years for European shares with Brexit and then COVID-19.

Since inception in December 2015 the ETF has returned an average of 3.6% per year. It was launched just before Brexit, so the time period is not a great period to look at.

The time from Brexit to January 2020 was a period of decent returns.

Why it makes sense to buy VEQ ETF in 2020

Europe is currently seeing a second wave of COVID-19 and restrictions are starting to be implemented again. More lockdowns are being considered, particularly in the UK (the biggest market).

There are good European shares. Those share prices are heading lower whilst the Aussie dollar strengthens (making it cheaper to buy businesses of foreign currencies). There is a double incentive to buy European shares with the current strength of Australia.

But there are plenty of other ETFs out there for growth and/or dividends. Check out our list of ASX ETFs.

From 200+ ETFs in Australia, our top investment analyst has just identified his #1 ETF for 2021 and beyond.

Low fees? Check.

Long-term growth potential? Check.

Regular cash returns? Check!

This ETF makes investing in ETFs "Super-Easy".

Simply click here or enter your email address below to access the full ETF report, ticker code, and step-by-step investment guide. Our expert's #1 ETF report is completely free.

No gimmicks, no payment, no credit card info. Just enter your email address below and we'll send you the report right away.

From 200+ ETFs in Australia, our top investment analyst has just identified his #1 ETF for 2021 and beyond.

Low fees? Check.

Long-term growth potential? Check.

Regular cash returns? Check!

This ETF makes investing in ETFs "Super-Easy".

Simply click here to access the full ETF report, ticker code, and step-by-step investment guide. Our expert's #1 ETF report is completely free.

No gimmicks, no payment, no credit card info. Just click the link below and enter your email address. We'll send you the report right away.

CLICK HERE TO GET THE REPORT

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At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

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General Financial Advice warning
The information on this website is general financial advice only. That means, the advice does not take into account your objectives, financial situation or needs. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. Please read our Terms & Conditions and Financial Services Guide before using this website.

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