The debt crisis in Europe could go either way. Friday’s big meeting could cheer up markets big-time, or it could cause investors to head screaming for the hills.
Either way, there’s a lot of uncertainty and fear out there at this moment. If you believe in the old Warren Buffett adage to “be fearful when other investors are greedy and greedy when they are fearful,” now is the time to be greedy. Responsibly greedy, of course.
So where should you invest if you’re thinking of plumbing the depths in Europe? Here are a number of options to consider for those who might be optimistic about the euro zone or thinking long-term about a recovery in the region:
European ETFs by Nation
As should be no surprise, there’s no shortage of ETFs that cover individual European nations. But be advised — based on the headlines about who is better off in regards to their debt, some of the outperformers in 2011 might surprise you. Consider that the iShares MSCI Spain Index Fund (NYSE:EWP) is down only about 8% year-to-date while the iShares MSCI Netherlands Fund (NYSE:EWN) is off almost 16% YTD despite the country holding an AAA rating from S&P. At least for now. Clearly there are more things at work in a nation’s economy than its sovereign debt, so examine each country-based ETF carefully if you go this route.
Broad-Based Europe Funds
A simple way to play Europe if you believe in brighter days ahead is a diversified investment like a mutual fund or ETF. The index-based Vanguard MSCI Europe ETF (NYSE:VGK) is a great option with its rock-bottom 0.14% expense ratio. Remember, most active managers don’t beat their benchmark — so this low-cost way to buy Europe is the most cost-effective for longer-term investors.
Other funds are out there with slightly different flavors, such as the iShares MSCI EMU Index Fund (NYSE:EZU) that focuses on the European Monetary Union nations in the euro zone (that’s the “EMU” in this name) but charge higher expenses even if they are pegged to indexes just like VGK. If you want to trust an “expert” to pick stocks for you, a decent actively managed mutual fund is the T. Rowe Price European Stock Fund (MUTF:PRESX). Dean Tenerelli has been at the helm since 2005, and expenses of a little over 1% are reasonable for this fund that garners a four-star rating from Morningstar.
Leveraged Europe Funds
Not for the faint of heart, aggressive investors can see twice the profits — or twice the losses — with the leveraged ProShares Ultra MSCI Europe ETF (NYSE:UPV) that will try to double the performance of Europe stocks. It’s worth noting for the bears out there there’s also the ProShares UltraShort MSCI Europe Index Fund (NYSE:EPV) that goes up twice as fast as Europe goes down. Use stop-losses and tread lightly if you go this route.