Everything you need to know about investing in European stocks
The European stock market has been doing it tough over the past 12 or so years. It’s struggled to hold up under the Eurozone debt crisis, Brexit, and then it was hit hard by the pandemic. Many Australian investors who wanted to put money into overseas markets gravitated towards the US market, which was boosted by tech giants. But, things are changing quickly. As Covid vaccination rates rise across Europe, and the continent begins to open up again, now could be the ideal time to consider investing in some European stocks.
Why should I buy European stocks?
Many of the world’s largest stocks are based in Europe. Stock markets in France, Germany, Italy and the Netherlands are performing as well as the US markets this year to date - and better than the ASX in Australia. In fact, the Wall Street Bank projects European stocks will climb 10 per cent over the next year, with market analysts at Goldman Sachs suggesting that Europe is well-placed to outperform all other major regions this year for the first time in 20 years. It’s thought this growth could continue well into 2022.
Aside from the fact that European stocks are ripe for growth at the moment, diversifying your portfolio can be a great idea. Limiting yourself to just one market could also be limiting your performance. When you invest internationally, you gain exposure to large global companies and sectors which aren’t always well represented on the Australian market, particularly in the tech sector. At eToro you can invest in European stocks and pay 0% commission.
Is there a strategy for investing in European stocks?
As well as buying individual stocks, you could buy shares in an Exchange Traded Fund (ETF) that conducts its business in Europe. This can help you get the benefits of widespread diversification at a lower cost than you might be able to get by attempting to build the positions directly. ETFs can also be good if you don’t have large amounts of capital, as they can help you gain access to different areas of financial markets. eToro currently offers 0% commission on opening and closing ETF positions.
It’s important to have a well thought out plan before investing. Think about what your timeline is, how much you expect as a return, and what percentage of your portfolio you’d like to diversify with European stocks. eToro offers a demo account with virtual funds so you can practice trading, and a CopyTrader programme where you can view what real traders are doing in real time and copy their trading automatically, without additional fees.
Which European exchanges and stocks should I look at?
Euronext is the largest exchange in Europe and operates exchanges in Amsterdam, Brussels, Dublin, Lisbon, Milan, Oslo and Paris, providing access to over 1,800 listed companies. It’s available on eToro, along with the SIX Swiss Exchange, the London and Frankfurt exchanges, and CFD trading on the Milan, Helsinki, Oslo and NASDAQ Copenhagen markets.
ASML (ASML) is based in the Netherlands and makes machines that etch microscopic patterns on semiconductors. Its stock has tripled in the past three years, but it looks like it will continue to rise. Pre-Covid, L’Oréal (LRLCY) saw enormous growth in China. It’s expected to continue this growth throughout the year, as people indulge in small luxuries such as skin and hair products. The ETF iShares MSCI Eurozone ETF (EZU) could also be worth a look. It’s made up of 242 stocks including ASML, LVMH, Siemens and SAP – all of which belong to growth sectors.
eToro does not provide investment advice. You should consider your own financial situation, particular needs and investment objectives before acting on any of the information available on this website.