European investments had largely fallen off investors’ radars following the end of the Greek financial crisis. The region of the world was mired in low-growth and with the lack of volatility after the Greek situation was temporarily fixed, it was a pretty sleepy area of the market that didn’t exactly offer investors much in the way of return potential.
But with the surprising Brexit vote results, European ETFs have come back front-and-center for many investors. And with the shocking performances that many funds targeting that region saw in the immediate aftermath of the results, investors definitely need to brush up on the key points for the funds targeting this area of the globe.
So, before you make your next Brexit-focused trade, make sure to consider the five keys below which will help guide you through this tumultuous market:
All British ETFs Aren’t the Same
Obviously, British ETFs stand to be most impacted by the removal of Britain from the EU and the ensuing turmoil that this shift is likely to bring. Already, the country has seen its markets rocked and its currency slump, as few are sure as to what will happen next for this market.
Easily the most liquid, and arguably best, way to play Britain through ETFs is with (EWU- ETF report) a fund that has close to two billion in assets under management and average daily volume approaching five million shares. However, this isn’t the only way to target the market as investors also have a small cap version (EWUS) which could be a bit more volatile, but also more focused on the domestic economy.
Additionally, there is a hedged currency product which could be a good option for investors who believe that more pound weakness is ahead, DXPS. This fund has outperformed its counterparts thanks to its hedge of the currency risk, and is likely to continue this track if trends continue. And lastly, while there is an AlphaDEX fund from First Trust (FKU) that targets this market, it has actually been an underperformer despite its attempt to find higher quality companies. It has actually crumbled more than EWU in the Brexit aftermath, and by a pretty wide margin too thanks to its extra exposure to the in-focus financial sector (see Beat Brexit-Induced Sell-Off Via These Inverse ETFs ).
