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Investing In European Stocks


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Investing In European Stocks To Capture Gains

Investing In European StocksWith the European economy showing signs of recovery and the European Central Bank (ECB) kicking off a Quantitative Easing (QE) program, investing in the European stocks makes a lot of sense. Stocks in the United States have reached valuations that are quite lofty by just about any valuation metric. With the United States Federal Reserve expected to raise interest rates and a strong United States Dollar, stock gains in the United States should be more limited than they have been in recent years. Investors looking for big gains in stocks should consider investing in European stocks, as the European economy recovers and stock valuations in many European stock markets are still at reasonable levels.

Investing In European Stocks Can Be Done In Many Ways

Out of all the major world economies, the European economy has been the most sluggish coming out of the 2008/2009 deep recession. It has meandered along between tepid growth and slight recession since 2009. This uneven growth pattern has caused investors to lose confidence in Europe and avoid European stocks.

This scenario is in the process of changing during 2015.   The weakening Euro currency and the newly implemented Quantitative Easing (QE) program by the European Central Bank (ECB) are working in concert to give the European economy a boost during 2015. The weakening Euro is making exports from Europe much more attractive in world markets. The European Quantitative Easing (QE) program is expected to inject the equivalent of $1.2 trillion United States Dollars into the European economy through September 2016. Lower oil prices are also acting as a tailwind for the European economy. However, since the countries in Europe are not as dependant on oil for transportation as other developed countries, the reduced cost of petroleum products has less of a positive economic effect on Europe in comparison to other developed economies in North America and Asia.

The sluggishness of the European economy since 2009 has had one benefit to investors looking to invest in 2015, it has kept European stock markets from racing higher. Although European stock markets, particularly Germany’s stock market, have performed well lately, they are still at valuations that are lower than United States stock markets. With economic growth expected to pick up in Europe during 2015 and their stock markets still at fair valuations, investing in European stocks may provide a way to grow an investment portfolio.

How To Invest In European Stocks

There are many ways to invest in European stocks. Some are aggressive, while others are more suited for investors that like to take a conservative approach to investing.

Deutsche Bank

If you are an investor that doesn’t mind taking on risk for higher returns, consider investing directly in European stocks or stocks of American companies that do a lot of business in Europe. European companies that trade on United States stock exchanges do so as American Depositary Receipts (ADRs). Some examples include the European banking giant Deutsche Bank (NYSE: DB), the software and computer services company SAP (NYSE: SAP), the global oil giant British Petroleum (NYSE: BP), and well known pharmaceutical company GlaxoSmithKline (NYSE: GSK). This is just a small sampling of European stocks that trade in the United States.   Hundreds of European stocks can be purchased on United States stock exchanges and on stock quotation systems, such as otcmarkets.com (Pink Sheets). In fact, Pink Sheets trades some of the largest European companies that want exposure to United States markets, but do not want to comply with United States listing requirements.

If you are a conservative investor, consider investing in European stocks via exchange traded funds (ETFs), exchange traded notes (ETNs), or mutual funds that are either exclusively invested in Europe or have large holdings of European stocks. Your gains will not be as great as you can earn by picking the best winning stocks, but your risk will also not nearly as high as investing in individual company stocks. Companies can buck market trends and lose value, even during strong stock market upswings. If European stocks rise in coming years, you can participate by holding European focused exchange traded funds (ETFs), exchange traded notes (ETNs), or mutual funds, and sleep easier at night.

Investing In European Stocks | Some European Investment Ideas

iShares EuropeThe following are some exchange traded funds (ETFs) that are focused on European stocks, from large cap stocks to emerging economy stocks to small cap stocks.

  • iShares Europe (NYSE: IEV) is an ETF that provides broad exposure to some of the largest European stocks included in the S&P Europe 350 index. Companies included in the index come from economic powerhouses France, Germany, and the United Kingdom, as well as many other European countries.
  • Vanguard FTSE Europe ETF (NYSE: VGK) is another ETF that provides broad exposure to large European stocks in the largest economies in Europe. VGK invests in stocks included in the FTSE Developed Europe Index that is comprised of major stocks in Europe.
  • SPDR S&P Emerging Europe (NYSE: GUR) invests in what is known as emerging economies of Europe, which are located in the south and east part of the continental Europe. GUR’s investments correspond to the S&P European Emerging Capped BMI index. The fund has heavy exposure to Russian companies, which is an important piece of information for investors in European stocks to consider.
  • WisdomTree Europe SmallCap Dividend (NYSE: DFE) provides a way to invest in Europe’s small cap companies. While small cap companies are not nearly as well known or well financed as their larger cousins, they do offer the potential for larger gains, should European stocks move higher in response to an economic revival. DFE invests in European small cap stocks included in the WisdomTree Europe SmallCap Dividend index.

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