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ETF Specialist

A Unique Way to Invest in the Eurozone

This ETF offers currency-hedged exposure to dividend stocks in the eurozone.

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Despite the risks they face, eurozone stocks may offer good diversification benefits to U.S. investors. However, currency risk is a very real threat. Low to negative interest rates across the eurozone, coupled with lackluster growth, could cause the euro to weaken relative to the U.S. dollar.  WisdomTree Europe Hedged Equity ETF  (HEDJ) offers investors a way to gain exposure to European stocks, while hedging this currency risk.

But even after taking most of the currency risk out of the equation, European stocks still face considerable risks amid a backdrop of weak demand and economic uncertainty across the eurozone. This may explain why most broad European stock indexes are trading at a discount to their U.S. counterparts. However, this macroeconomic risk may present investors with an opportunity to buy quality multinational names that happen to be based in the eurozone at reasonable valuations. This fund attempts to offer exposure to these types of stocks. It screens for dividend-paying stocks trading in the eurozone that generate more than half of their revenues outside of Europe. It then weights its holdings by cash dividends paid. This may be a suitable core position for U.S. investors looking to profit from a potential rebound in the eurozone, while limiting currency and region-specific risk.

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Thomas Boccellari does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.