5 tips to start investing in European stocks
Here's why you should consider investing in European stocks right now, and how to gain affordable and easy access to Europe's exchanges.
When Aussie investors want to diversify their portfolios with overseas investments, US stocks are often the first port of call. But there are several good reasons why you should consider bypassing Wall Street and checking out the opportunities on offer in Europe.
Not only do Europe's exchanges offer access to some of the world's biggest and best-known companies, but there are also several factors pointing to positive times ahead for European stocks.
Why should you consider investing in European stocks? And how can you access European markets from Australia? Keep reading to find out.
1. Europe has had a solid start to 2021
The S&P 500 index of the largest companies in the US has been trading at record highs recently, generating plenty of headlines. And at the time of writing, the S&P 500 has risen by over 19% since the start of the year.
Over in Europe, there's also been plenty of growth on offer across a range of exchanges. The STOXX Europe 600, an index which tracks the performance of 600 stocks across 19 European countries, has climbed over 14% so far this year. Individual market indices like the DAX 30 and the Swiss Market Index have also seen double-digit gains in the same period.
But while some analysts believe that US stocks are overvalued, there are plenty of signs that Europe's strong performance could continue.
2. The outlook in Europe is positive
Earlier this month, BlackRock Investment Institute released its mid-year report [PDF] for the next 6-12 months. In it, the investment management firm downgraded its outlook for US stocks to neutral, but upgraded its outlook on European and Japanese equities.
"We see U.S. growth momentum peaking and expect other regions to be attractive ways to play the next leg of the restart as it broadens to other regions, notably Europe and Japan," the report read.
As for Europe: "We see a sizeable pickup in activity helped by accelerating vaccinations. Valuations remain attractive relative to history and investor inflows into the region are only just starting to pick up."
At the same time, most investment banks are forecasting that European stocks will outperform US equities for the rest of 2021 and into 2022, and Morgan Stanley analysts have picked Europe to beat all other major markets this year. This bullish outlook is in large part due to Europe's recovery from the COVID-19 pandemic, as vaccination numbers increase and lockdowns are lifted.
And with recent economic data out of Europe indicating that the recovery is expected to continue, the outlook for Eurozone shares certainly seems bright.
SPONSORED: Your guide to the 5 largest European stock exchanges and the 5 largest European stocks by market cap.Read more…
3. Europe is home to some of the world's biggest blue chips
When you think of major global brands, US companies like Apple, Microsoft, Facebook and Amazon are often the first that spring to mind.
But if you take a look at a list of the world's top 100 stocks by market capitalisation [PDF], you'll find that a number of the world's biggest blue-chip companies are European.
Some of them you'll have no doubt heard of before, like Swiss behemoth Nestlé (up 9% Year-To-Date) and French beauty brand L'Oréal (up 23.97% YTD). Others aren't quite as widely known by the average Joe, such as Dutch semiconductor technology company ASML (up 57.27% YTD) and Danish healthcare giant Novo Nordisk (up 25.01% YTD).
And then there are those hiding in plain sight – you may never have heard of LVMH (up 32.55% YTD), but we're willing to bet that its full name of Moët Hennessy Louis Vuitton will sound a little more familiar.
From Volkswagen (up 37.73% YTD) to technology and healthcare giants, Europe's biggest blue chips provide exposure to a diverse range of industries and markets.
4. Europe offers a wide range of investment opportunities
Another reason why you might like to consider investing in European stocks is the fact that not only can you trade shares in thousands of different companies, allowing you to diversify your portfolio, but you can also trade across a range of exchanges. These include major names like the London and Frankfurt Stock Exchanges as well as the SIX Swiss Exchange.
But the largest stock exchange in Europe is Euronext, a pan-European provider with exchanges in the Netherlands, Belgium, Ireland, Portugal, Italy, Norway and France. As a result, it provides access to over 1,800 listed companies.
Add NASDAQ's Nordic and Baltic Exchanges into the mix, providing access to markets in Sweden, Denmark, Estonia and more, and it's easy to see that there are plenty of possibilities to explore.
5. Finding the right broker
If you'd like to start trading European stocks, you'll need to find a broker that provides access to European exchanges.
eToro is one platform that offers European access for Australian investors, allowing you to invest in European stocks and pay zero commissions. The social investing platform lets you invest on the Euronext exchanges, the SIX Swiss Exchange, UK and German markets and a number of other exchanges. You get to buy and sell shares directly in many cases, but CFD trading is offered on the Milan, Helsinki, Oslo and NASDAQ Copenhagen markets.
Ultimately, it's up to you to research your options and decide on the best online investing platform for your needs. Look for a broker that provides access to the markets you want, has competitive brokerage fees and has the investing tools and analysis you need to help you make informed investment decisions.
Once you've found the right platform, it's time to start researching the best Euro stocks for 2021 and beyond.
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We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.