WisdomTree DEFA Fund: A Case For Fundamental Indexing?

Global ETFs have performed better than domestic ETFs for the past few years. A year ago WisdomTree introduced the DEFA Fund (DWM), which rivals one of the biggest ETFs, iShares MSCI EAFE (EFA). Both funds invest in the same 21 European and Asian countries, giving investors a diversified basket to some of the hottest overseas markets.

The main difference is that DWM marches to a much different indexing beat than the market-cap weighted MSCI Index, reports Tim Middleton for MSN Money. DWM ranks companies by the total dividends they pay.

In the 12 months ending July 10, DWM rose 33.6%, while EFA gained 27.6%. Looking at the two ETFs, a big difference is in the weighting of Japan. Japanese companies pay low dividends, thus making up only 8.7% of DWM, but is heavily weighted in EFA at 22.3%. As we know, Japan has not been the best performing region lately.

Keep in mind there is only a year performance under DWM's belt and EFA has been around since 2001.

DWM vs. EFA 1-yr chart: