Deciding where to invest your money can be overwhelming even when you’re only focusing on the United States. The question that inevitably comes up is, “should I invest outside the U.S.?” “And if so, how?” The search often leads people toward the best European index funds.
And, lucky for you, that’s what this post is all about! Take a look, read the basics about each investment here, and then decide for yourself if these investments are right for you! This post was written by our staff writer, Lindsey Smith.
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The Best European Index Tracker Funds
European index funds typically invest at least 70% of their total assets in Europe. Most of these concentrate heavily on the more developed markets, like the U.K., the Netherlands, Germany, France, and Austria. TUR, DBEU, and EWU are the best Euro ETFs to invest in Q4 2022, based on the best one-year trailing total returns. With 73 ETFs traded on the U.S. markets, Europe ETFs have total assets under management of $45.91B.
Vanguard FTSE Europe ETF VGK is the largest Europe ETF with $14.68B in assets. The best-performing Europe ETF in the last trailing year was TUR at 43.23%. Note that Europe’s economy grew by 4.2% in the second quarter of 2022, easing recession worries and stabilizing the stock market. Investing in Euro ETFs can provide diverse exposure to companies in this market.
The 13 Best European Index Funds for 2023
These are our top 13 picks for the best European ETFs and index funds for 2023. Everyone’s finances and risk tolerance are different, so make sure you check yourself first.
1. SPDR Portfolio Europe ETF (SPEU)
Rated #1 in all of Europe, the SPDR Portfolio Europe ETF is great for long-term holds. So naturally, we placed it as #1 on our list of the best Europe index funds.
This fund tracks the performance of the STOXX Europe Total Market Index, which is the European equivalent to the S&P 500 Index here in the U.S. It provides broad access to publicly-traded Western European companies using a sampling strategy, picking the top performing companies within the fund.
With one of the lowest expense ratios of 0.09% and an annual dividend yield of 2.56%, this is one of the best choices for all levels of investors to gain exposure to the European market.
2. Franklin FTSE Europe ETF (FLEE)
FLEE follows the performance of the FTSE Developed Europe Capped Index. It has performed well over the last year, and mixes its holdings with large-and-mid-cap companies in 16 developed countries within Europe. With an expense ratio of 0.09%, it gives good access to the European market as a whole.
3. iShares Core MSCI Europe ETF (IEUR)
iShares Core MSCI Europe ETF tracks the MSCI Europe IMI Index. This index is a free float-adjusted market-cap-weighted index that has securities from 15 developed market countries.
These include Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom.
With one of the lowest expense ratios on this list of 0.09% and a solid annual dividend yield of 2.36%, this fund clearly gives you good exposure to a lot of European countries, and is a great choice for international stock allocation. And, for those reasons, we listed it as one of the best European ETFs for 2023.
4. iShares MSCI Europe Small-Cap ETF (IEUS)
IEUS tracks the MSCI Europe Small Cap Index, which is made up of small-cap companies across the 15 developed market countries in Europe. This fund gives good exposure to smaller, publicly-traded companies in solid European markets, and targets small cap specific segments of the market.
IEUS has an expense ratio of 0.40% and an annual dividend yield of 1.67%, and is a good choice if you want European small-cap exposure.
5. Vanguard FTSE Europe ETF (VGK)
Vanguard’s European ETF tracks the performance of an index that spans the European market. It invests all its assets in the stocks included on the FTSE Developed Europe All Cap Index. Holdings are market-cap weighted, and include companies like Nestle and AstraZeneca.
With undoubtedly the lowest expense ratio on this list of 0.08% and an annual dividend yield of 2.52%, this is a really popular ETF for gaining exposure to a broad swath of the European market.
6. iShares MSCI Eurozone ETF (EZU)
EZU tracks the MSCI EMU Index, which is made up of large-and-mid-cap companies from developed market countries that use the euro as their official currency. This includes Austria, Belgium, Finland, France, Germany, Ireland, Italy, the Netherlands, Portugal and Spain. These markets are typically well-performing, or are on a similar level to all developed countries.
This fund boasts an expense ratio of 0.51% and an annual dividend yield of 2.22%. EZU gives you broad market exposure to 10 countries in Europe.
7. iShares MSCI Austria ETF (EWO)
EWO has had some of the highest growth in the last year of all the European ETFs. It tracks the MSCI Austria IMI 25/50 Index, which follows the performance of a wide range of companies that trade on the Austrian market. This fund has holdings in the finance, materials, industrial, energy, and utility sectors.
With a decent expense ratio of 0.51%, and an annual dividend yield of 1.76%, this is a great performing ETF for anyone who wants specific exposure to the Austrian market.
8. WisdomTree Europe SmallCap Dividend Fund (DFE)
Another fund that has performed really well over the last year is DFE. It has a respectable expense ratio of 0.58% and annual dividend yield of 2.40%. This fund tracks the WisdomTree Europe SmallCap Dividend Index, which is an index that follows small capitalization companies in the dividend-paying market within Europe.
This is a nice choice for diversification, following small-cap companies with the opportunity for robust growth. If you’re looking to buy into the European market with a little more risk/reward, this one’s for you.
9. iShares MSCI United Kingdom Small-Cap ETF (EWUS)
Continuing the small-cap good growth trend is EWUS. It has an expense ratio of 0.59% and an annual dividend yield of 1.33%. EWUS tracks the MSCI United Kingdom Small Cap Index, which follows the performance of equities which represent the bottom 14% of the U.K. Securities market.
This Europe ETF fund holds industrial, consumer discretionary, and financial sectors and provides good exposure to smaller companies based in the U.K. This is a great fund if you want to get into the U.K. economy from abroad, and diversify across sectors and segments of the market.
10. Vanguard European Stock Index Fund (VEURX)
Like Vanguard’s European ETF, VEURX tracks the FTSE Developed Europe All Cap Index. This fund does come with a minimum investment of $3,000, but performs very well year over year. With a good expense ratio of 0.23% and an annual dividend yield of 2.30%, this index fund is a solid choice for entering the European market in a broad way.
11. iShares MSCI Turkey ETF (TUR)
TUR tracks the MSCI Turkey IMI 25/50 Index. This is a broad-based index composed of Turkish equities, providing broad exposure to companies based in Turkey. With this fund, industrials, materials, and consumer staples receive the largest fund allocations.
This ETF invests in a mix of growth and value stocks of large-cap companies. BIM Birlesik Magazalar A.S. (BIMAS.E: IST); Eregli Demir Ve Celik Fabrikalari T.A.S. (EREGL.E:IST); and Turk Hava Yollari A.O. (THYAO.E:IST), are the top three holdings of TUR. With an expense ratio of 0.57% and a dividend yield of 3.45%, this is a great performing EFT for anyone looking for exposure in this emerging market.
12. Xtrackers MSCI Europe Hedged Equity ETF (DBEU)
DBEU was designed to track the MSCI Europe U.S. Dollar Hedged Index. This ETF is hedged to the U.S. dollar, but provides broad exposure to the European equity market. That means that returns will solely rely on the performance of the equities, instead of depending on currency fluctuations. Healthcare, financials, and industrials receive the largest fund allocations in this sector.
The fund’s largest geographical exposures are Great Britain, France, and Switzerland. Nestlé S.A. (NESN:SWX), dividend right certificates of Roche Holding Ltd. (ROG: SWX), and ASML Holding NV (ASML:AMS), are the top three holdings of DBEU. With a high annual dividend yield of 2.49% and an expense ratio of o.45%, this is a good investment opportunity.
13. JPMorgan BetaBuilders Europe ETF
The investment focuses on results that closely correspond, before fees and expenses, to the performance of the Morningstar® Developed Europe Target Market Exposure IndexSM. The fund invests at least 80% of its assets in securities included in the underlying index.
This ETF’s geographical exposure includes, Austria, Belgium, France, Germany, Ireland, Italy, Denmark, Finland, the Netherlands, Norway, Sweden, Switzerland, Portugal, Spain, and the United Kingdom. With an expense ratio of 0.09% and an annual dividend yield of 2.02%, this is a good ETF investment.
Should I Invest in the European Market?
The number one thing for every investor to remember is diversification. The more diversified your portfolio, the hardier your investments will be. Having some exposure to the European market is a great way to diversify, but how much and where to put your money can be the difference between a good spread and a terrible decision.
Focusing on the European ETF List
In the last year, European equities have underperformed when compared to the U.S. Market by about 2.7%. And, as with all international options, the fees can sometimes be higher than it’s worth to invest. It’s for these two reasons that we’ve focused on the best European ETFs for 2023 (Exchange-Traded Funds).
They trade on the stock market just like a stock, and typically offer the lowest fees with good returns. Their ease-of-purchase and relative stability thanks to tracking entire indexes make them a good choice for any investor.
How Can I Invest in Index Funds in Europe?
Investing in Europe Index funds is just as easy as investing in any index fund that is based in the U.S. Since index investing is worldwide, you can invest in just about any country in the world.
If you use a platform like Vanguard, you’ll simply login and purchase shares of the index fund ETF of your choice that is investing in or tracking European indexes. Of course, you can also use another platform or a brokerage or bank, but if you want the lowest fees, Vanguard is a great choice.
The Best European Index Funds For 2023 – In Summary
The best European index funds are the ones you feel most comfortable investing in. One of the best ways you can diversify your portfolio and the best way to invest in Europe is through European ETFs. Did we miss any of your favorites? Let us know in the comments what your choices are for the best European index funds.
