The onslaught of new international ETFs continued this month with two new products from the WisdomTree family of funds.
The company looks to continue their focus on hedged products with exposure to the developed international markets as well as another European ETF that does not provide currency exposure.
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The WisdomTree International Hedged Dividend Growth ETF (NYSE: IHDG) is designed to provide exposure to developed markets while at the same time neutralizing foreign currency fluctuations.
The 300 stocks in the ETF are chosen from the WisdomTree DEFA Index with emphasis on growth and quality factors and are weighted based on annual cash dividends.
The top countries represented include the U.K., Switzerland, Australia and Germany. The consumer staples, consumer discretionary and health care are the most heavily weighted sectors in the portfolio.
The top holdings are Roche Holding AG, BHP Billiton (NYSE: BHP)and Nestle. The expense ratio is 0.58 percent and the index currently has a 3.1 percent dividend yield.
The WisdomTree Europe Dividend Growth ETF (NYSE: EUDG) is similar to IHDG, except it does not hedge against foreign currency fluctuations and it only has exposure to European countries.
Therefore, a rise in the Euro or British Pound would have a negative affect on the annual return for this ETF due its lack of a hedging strategy.
The 300 stocks are chosen in the same manner as IHDG and also weighted based on dividends. The U.K., Switzerland and Germany make up 63 percent of the portfolio with consumer staples and health care the top two sectors.
Top holdings are Novartis (NYSE:NVS), Nestle and Roche Holding AG. The index dividend yield is 3.1 percent and the expense ratio is 0.58 percent.
When it comes time to decide if a hedged ETF or a non-hedged ETF is the best choice for a portfolio, it comes down to one factor -- currency movement. If the U.S. dollar continues its current rally from a yearly low, it would be wise to use a hedged ETF to combat the rising greenback and declining foreign currency.
If the long-term downtrend of the U.S. Dollar continues into the end of the year, it would be better to leave the international ETFs unhedged. For what it is worth, money has been flowing into the hedged ETFs as investors expect the U.S. Dollar to continue the bounce from the low.
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