MR MONEY MAKER: Investors shouldn't shun the EU after Brexit

What’s Happening?

Markets and investors love to focus on exciting successes. 

This year we have certainly had enough excitement, and those with the bravura to dive into those turbulent waters might have had some significant success. 

After the dreadful pandemic stock drop, technology shares have been the primary force driving the US markets to new highs. 

Since then we have seen some catch-up in other sectors, but leading European stocks have been among the laggards.

Why Does It Matter?

The EU, despite the departure of the UK, is still the largest trading block in the world, and as investors we would be foolish to ignore it. 

While we are all familiar with, and thoroughly fed up by, the arguments over the euro, and of course Brexit, there are some very successful businesses within this economic entity.

The EU suffers from a poor reputation for slow decision-making and endless committees which try to move this confederation forward at a seemingly glacial pace, but we would be wise to separate our personal politics from investment opportunities.

Whatever you think of this economic bloc, it is not going away and will still have a huge impact on our own UK finances.

However, don’t think just about the EU – consider broader Europe with Switzerland, Norway and even including the UK.

What Should I Do?

Good investment disciples will, at some stage, mention to you the need for proper ‘asset allocation’, which is just wealth manager speak for not putting all your eggs in one basket.

So we should have some investment in Europe. This is not just for the further spreading of risk, but because there is also some good value there. But it will take time to show.

This year, the large S&P500 in the US has performed well with an 18 per cent rise, but the Euro Stoxx 600 has been virtually flat.

Most of this has related to the makeup of the index which has not had the technology drive that the S&P index has. 

But at some stage this gap will shrink as more attention turns to the seemingly duller companies in this European index.

Any Suggestions?

There are lots of good EU firms, but trying to stock pick across a continent is a mug’s game unless you are a specialist.

To that end, researching and following the news on some great continental companies like LVMH and Nestle can soon give you a level of knowledge far higher than most advisers and analysts.

A simpler and probably safer approach would be to buy an ETF (Exchange Traded Fund – basically a tracker fund that trades like a share).

So I would look at the Euro Stoxx 600 index, which has several ETF providers following it, including Ishares, Invesco and Lyxor.

And the charges for such ETFs vary from between 0.07 per cent to 0.2 per cent, so they are low cost and very easy to trade.