By Rick Walter
When Moody's cut Ireland's debt to just above 'junk' last week, making money in the European markets has gotten just a little more riskier. The markets still have to deal with the debt problems of Portugal, Spain and Greece. Monetary policy by the the Euro Union and the U.S. is still a ways off from normalizing.
However, the reason that you would want to invest in European markets is because these markets gives you the potential to increase your portfolio’s total return, they act as a hedge against dollar assets and also gives your portfolio diversification which reduces overall portfolio risks due to the low correlation of these markets to U.S. markets. Long-term evidence also suggests that international markets outperform U.S. markets in most periods, therefore investing in Europe may and can help you save more for retirement.
But can an investor make money in Europe today? Should you take a chance and invest in Europe while monetary policy rules the day? I have looked at the performance of five European ETFs funds over the last four months as follows:
There is the ProShares Leveraged Ultra Europe Fund: (UPV) trading at $41.56 with a return that is twice the index returns of 26% for this period.There is the iShares MSCI Europe Financial Sector ETF Fund: (EUFN) trading at $23.85,that is up 13% over this same period.The iShares S&P Europe 350 Index ETF Index Fund: (IEV) currently trading at $42.94 is up 12%.The European Monetary Union ETF Fund : (EZU) trading at $39.45 is up about 13% and the PowerShares BLDRS Europe 100 ADR Index Fund: (ADRU) trading at $22.59 is also up about 10.4%.
These European funds are tracking their respective indexes equally except for the PowerShares BLDRS Fund which is tracking its index at a slightly lower return, but all of these funds irrespective of their current four month returns do not make me want to take the risk of investing, because the risk factors are too high.