by Kent Thune | July 5, 2014 5:45 am
After watching the United States get knocked out of the World Cup by Belgium, I began to think: How might Belgium compare to the U.S. in the world of investing? Also, are stock mutual funds that invest in countries from the soccer-rich regions of South America and Europe performing as well as their respective soccer teams in 2014?
Because I want the U.S. to still have a chance of something, I’ve put together my own little World Cup of Mutual Funds!
American sports commentators and fans of soccer (we don’t call it fútbol) like to categorize the international teams in a similar way as in the mutual fund world: In soccer, we think in terms of just a few broad groups for comparison — North America, South America, Africa, Asia and Europe. In respective mutual fund categories, the broad categories include domestic stock, emerging markets and European stock, which capture many of the same countries as the soccer groups.
Therefore, for our 2014 World Cup of Mutual Funds competition, we’ll look at year-to-date performance through June 30 by the best respective mutual fund representatives: a large-cap index fund, an emerging markets index fund, and a Europe stock index fund.
For simplicity, and to keep the comparisons consistent, we’ll use Vanguard index funds. And when we want to take a closer look at a particular country’s performance, we’ll use ETFs.
Vanguard Emerging Markets Stock Index (VEIEX) put in a 6.9% performance thus far in 2014, and that return would be much lower if not for the big gains from India stocks in the second quarter, as iShares India 50 (INDY) is up a whopping 23.7%.
Therefore, after being knocked out of group play in the real World Cup, team India goes home to some nice investment gains as a consolation prize (although I’m sure they’d rather have the World Cup trophy … or for that matter, would’ve rather at least shown up in Brazil).
Emerging-market countries also include Brazil, Mexico, China, and Russia, among others. In World Cup play, only Brazil remains in competition and China failed to even qualify, which gives us our first World Cup correlation to the stock mutual fund world:
iShares MSCI Brazil (EWZ) is up a respectable 9.1% in 2014, while iShares China Large-Cap (FXI) is down 2% for the year so far.
The Vanguard Europe Stock Index (VEURX) scores 5.8% year-to-date, placing it behind the emerging markets/South America team.
Here’s something interesting in this group: Do you recall the sovereign debt crisis that followed the global recession of 2008 and 2009? The four weakest nations in this economic crisis were given the unflattering acronym, PIGS, which stood for Portugal, Italy, Greece and Spain.
All of these teams have been eliminated from World Cup play, which is especially humiliating for Spain — the winner of the 2010 World Cup, but not even a knockout-round participant this year.
In my World Cup of Mutual Funds, consisting of three regional teams, the Vanguard 500 Index (VFINX) wins the game for the U.S. and North America by barely edging out South America’s emerging markets fund with 7% and Europe’s 5.8%.
When we look more closely at the country-by-country analysis, Belgium’s, 6.3% year-to-date gain in iShares MSCI Belgium (EWK) also loses to the 7% score for the U.S. Also on a country-by-country comparison, India deserves credit for its impressive 23.7% gain thus far in 2014.
One more thought: I wonder where Tim Howard, who made $2.6 million in 2012, and Clint Dempsey, who earned $8 million in 2013, will put their money?
I suspect it won’t be in Belgium.
As of this writing, Kent Thune did not hold a position in any of the aforementioned securities.
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