It can pay dividends to consider investing outside Canada (and the U.S.) for those seeking greater diversification and a potential shot at more value. Undoubtedly, the TSX Index and S&P 500 have both had incredible runs. And while the TSX Index could outrun the S&P over the next couple of years because of the U.S. market’s relative overvaluation, I think that diversifying internationally might be the best way to go if you’re looking for a broader market rally.
Though it may be a tad intimidating to think about buying into a market whose stocks you’re not familiar with, there are so many magnificent exchange-traded fund (ETF) options out there that can instantly grant you a slice of some pretty enticing international stocks without having you put in too much effort in researching individual names.
Personally, I think ETF investing is the way to go if you’re one of many Canadian investors who seek to rebalance and rotate into some of the international names out there. With plenty of low-cost options available, there has arguably never been a better time to be an ETF investor. In this piece, we’ll have a look at some of my favourite international ETFs to buy this December.
Vanguard FTSE Developed All Cap ex North American Index ETF
If you’re like many self-guided Canadian investors, you’re probably heavily invested in Canada and the U.S. Undoubtedly, for those willing to venture outside of North America for investments, Vanguard FTSE Developed All Cap ex North American Index ETF (TSX:VIU) should be on your watchlist this holiday season. As the lengthy name of the VIU suggests, it invests in a significant number of international firms outside of the continent. The 2.42% yield is also quite generous and is way above the yield of the TSX or the S&P 500.
Notably, you’re gaining exposure to a broad range of market caps across Europe, Asia, and other developed (as opposed to emerging) markets. Given the developed markets are less choppy, though perhaps less growthy in a lower-rate world, investors should expect about as much volatility (the 1.02 beta entails correlation to the broad market) as they would with the average TSX stock.
Undoubtedly, there are too many holdings in the fund to go over, but for investors who want something that invests in areas you may have never thought of, I’m a fan of the fund and think it’s a very interesting pick, especially if the TSX and S&P 500 rallies begin to flatline at some point.
BMO Europe High Dividend Covered Call ETF
BMO Europe High Dividend Covered Call Hedged to CAD ETF (TSX:ZWE) is another interesting option for investors who want a fatter yield and exposure to the European markets. The yield sits at an astounding 7% at the time of this writing, thanks in part to the covered call strategy implemented by the ETF.
While capital gains will be harder to come by, I do find the ZWE to be a stellar way to land a lower beta (0.71) while getting paid a massive distribution for doing so. And when you can diversify beyond North America, there are geographic diversification benefits as well.
Whether you’re a yield hunter, a seeker of relative value, a low-beta defensive investor, or someone seeking European market exposure, or both, the ZWE is really a standout kind of play that checks a lot of boxes!