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Posted on 27 January 2015.
Now that the European Central Bank’s President Mario Draghi has announce a Quantitative Easing (QE) program for Europe, it is time to consider the best ways to approach investing in European QE. The European Central Bank announced that it will buying €60 billion euros per month of bond securities starting immediately and lasting until September 2016. €60 billion euros a month equals approximately $1.2 trillion United States dollars through September 2016 at current exchange rates.
No matter how you calculate it, the European Central Bank has delivered exactly what the markets were looking for in the way of significant Quantitative Easing. This is important for investors, because it makes it likely that European stocks will outperform over the next two years, as the monetary stimulus from the European Central Bank provides plentiful liquidity to European stock markets and ensures interest rates across Europe stay low over the next couple of years. It will also cause an uptick in European exports to the rest of the world, as the Eurozone’s currency is devalued, causing products produced in the region to be less expensive on the world markets, boosting the Eurozone economy.
Does European Central Bank Quantitative Easing mean an economic recovery is coming to Europe? Not necessarily, but it should at least keep Europe from slipping into a recession and should cause European stocks to outperform. It will not be hard for European stocks to outperform United States stocks, because European stock markets are less expensive than United States stock markets. With the European Central Bank providing a Quantitative Easing backstop, it is time to consider which European stocks and funds make the most sense for investing in European QE.
There are many ways to invest in European QE and profit from this easy money policy. You do not need a brokerage account that is capable of buying securities on European stock exchanges. Many large European companies have shares available to trade on United States stock exchanges via American Depositary Receipts (ADRs). American Depositary Receipts are indirect holdings of foreign company’s stock. If there are no American Depositary Receipts, then shares of European companies may be available on the otcmarkets.com (Pink Sheets) trading platform. There are also numerous Exchange Traded Notes (ETNs), Exchange Traded Funds (ETFs) and mutual funds that focus on Europe and can be purchased in the United States.
One good thing about investing in European stocks during European QE is that unlike American stocks, European stocks are not richly valued, on average. As a whole, European stocks are fairly valued to undervalued, which means they have the potential to increase in value as European QE plays out and growth and earnings pick up.
The best sectors to focus on when investing in European QE include the financial sector, the industrial sector and the IT sector. All three of these important stock market sectors stand to benefit from European QE and the higher growth that it will bring.
The following are some European Exchange Traded Funds (ETFs) for investing in European QE.
The following are some European mutual fund ideas for investing in European QE.
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