WisdomTree's EMD v.s. iShares EFA

Includes: DWM, EFA
by: Carl T. Delfeld

The iShares MSCI EAFE exchange-traded fund (NYSEARCA:EFA) is the leading ETF for investors looking for international exposure and the second largest ETF in terms of assets under management. WisdomTree hopes to change this with its new ETF: WisdomTree Dividend Index of Europe, Far East Asia and Australasia Index (NYSEARCA:DWM).The WisdomTree family of ETFs distinguishes itself by a common sense approach that can be summed up by "buy low, and sell high."

WisdomTree uses a rules-based methodology to select and weight companies in its ETFs by a measure of fundamental value — instead of stock price and therefore market value alone. After researching all of the fundamental indicators of value, WisdomTree believes the most-effective metrics are cash dividends, or core earnings.

The WisdomTree Dividend Index of Europe, Far East Asia and Australasia (WisdomTree DEFA) is a fundamentally weighted Index that measures the performance of dividend-paying companies in the industrialized world, excluding Canada and the United States, that pay regular cash dividends and that meet other liquidity and capitalization requirements. It is comprised of companies incorporated in 16 developed European countries, Japan, Australia, New Zealand, Hong Kong and Singapore. Companies are weighted in the Index based on annual cash dividends paid.

EFA and DWM track the same countries but while EFA's basket of companies selection and weighting is based on market value, DWM is based on cash dividends. Therefore, the distribution of companies and countries is different in a few important ways.

First of all, in terms of countries, France and Australia jump ahead of Japan and Germany in the DWM ETF due to their higher dividends.

1) United Kingdom 22.83%
2) France 12.92%
3) Australia 8.89%
4) Japan 8.43%
5) Germany 8.00%