Top European Stock Market Index Funds for Your Portfolio

When considering diversification and exposure to the European stock market, investing in European stock market index funds can be a prudent and efficient strategy. Here are some of the top European index funds that you should consider adding to your portfolio, based on their performance, expense ratios, and broad market coverage.

1. SPDR Portfolio Europe ETF (SPEU)

The SPDR Portfolio Europe ETF stands out as a top choice for investors seeking long-term exposure to the European market. This ETF tracks the STOXX Europe Total Market Index, which is akin to the S&P 500 in the U.S., providing broad access to publicly-traded Western European companies. With an exceptionally low expense ratio of 0.09% and an annual dividend yield of 2.56%, SPEU is an attractive option for all levels of investors.

2. iShares Core MSCI Europe ETF (IEUR)

The iShares Core MSCI Europe ETF is another highly recommended fund, tracking the MSCI Europe IMI Index. This index covers 15 developed market countries in Europe, including Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom. IEUR boasts a low expense ratio of 0.09% and an annual dividend yield of 2.36%, making it an excellent choice for international stock allocation.

3. Vanguard FTSE Europe ETF (VGK)

Vanguard’s FTSE Europe ETF is a popular choice for gaining broad exposure to the European market. This ETF tracks the FTSE Developed Europe All Cap Index, which includes large and mid-cap stocks from developed European countries. With the lowest expense ratio on the list at 0.08% and an annual dividend yield of 2.52%, VGK is a cost-effective and reliable option.

4. iShares MSCI Eurozone ETF (EZU)

For investors focused on the Eurozone, the iShares MSCI Eurozone ETF (EZU) is a strong contender. EZU tracks the MSCI EMU Index, which includes large and mid-cap companies from countries that use the euro as their official currency, such as Austria, Belgium, Finland, France, Germany, Ireland, Italy, the Netherlands, Portugal, and Spain. Although it has a slightly higher expense ratio of 0.51%, it offers broad market exposure and an annual dividend yield of 2.22%.

5. Xtrackers MSCI Europe Hedged Equity ETF (DBEU)

The Xtrackers MSCI Europe Hedged Equity ETF is designed for investors who want to mitigate currency risks. DBEU tracks the MSCI Europe U.S. Dollar Hedged Index, providing broad exposure to the European equity market while hedging against U.S. dollar fluctuations. This fund has significant allocations to healthcare, financials, and industrials, with top holdings including Nestlé S.A., Roche Holding Ltd., and ASML Holding NV. It has an expense ratio of 0.45% and an annual dividend yield, although lower, it offers stability against currency fluctuations.

Key Indices to Consider

FTSE Developed Europe

This index tracks large and mid-cap stocks from developed countries in Europe, covering 525 constituents as of June 2024. It is tracked by ETFs such as the Vanguard FTSE Europe ETF (VGK).

MSCI Europe

The MSCI Europe index includes leading stocks from 15 European industrial countries, with 418 constituents as of June 2024. ETFs like the iShares Core MSCI Europe ETF (IEUR) track this index.

STOXX Europe 600

This index tracks the 600 largest European companies, providing a broad and diversified exposure to the European market. ETFs such as the iShares STOXX Europe 600 UCITS ETF track this index.

Performance and Dividend Yields

• MSCI Europe: Over the past year, this index has seen a return of 19.06%, with a 5-year return of 51.52%.
• STOXX Europe 600: This index has delivered a 1-year return of 19.44% and a 5-year return of 51.95%.
• FTSE Developed Europe: It has posted a 1-year return of 19.54% and a 5-year return of 51.84%.

In terms of dividend yields, funds like the Vanguard FTSE Europe ETF (VGK) and the iShares Core MSCI Europe ETF (IEUR) offer yields of 2.52% and 2.36%, respectively, making them attractive for income-focused investors.

Conclusion

European stock market index funds offer a balanced and cost-effective way to gain diversified exposure to this market, potentially yielding strong long-term returns. Consider your investment strategy and risk tolerance when choosing between funds tracking indices like FTSE Developed Europe, MSCI Europe, and STOXX Europe 600.