# Want to buy MSCI EAFE minus Europe



## Loon (Apr 12, 2012)

I was going to buy VEA for MSCI EAFE exposure but I want to cut Europe out for the time being. What is the easiest/best/cheapest way to do this? VPL for Pacific seems obvious, but what else and in what proportion?


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## CanadianCapitalist (Mar 31, 2009)

Vanguard EAFE Index Fund = Vanguard Europe (VGK) + Vanguard Pacific (VPL). If you want to cut out Europe, you are left with VPL.


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## Loon (Apr 12, 2012)

Hmm. I see VPL is largely Japan, not sure if I'm ready for that. I was originally thinking 10% VEA and 10% VWO of total portfolio but I kind of think Japan and Europe are not going to do well in the next 5 years. What is a good way to get exposure to emerging and developed ex-North America?


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## Sampson (Apr 3, 2009)

Which Countries exactly are you thinking?

Developed ex-North America is essentially Europe and the Far-East.

You could argue that exposure to Australia might give some diversification, but their economy is, like Canada heavily exposed to commodities.
Think of the G8 nations, if you cut out Japan and Europe, you are left with Russia.

You could go with ETFs covering specific countries like Israel, Malaysia, South Korea, Taiwan, Australia, all theses developed economies that are too small to be lumped into G8-like groups, but is that useful in portfolio construction?


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## Loon (Apr 12, 2012)

Sampson said:


> Think of the G8 nations, if you cut out Japan and Europe, you are left with Russia.


Russia is included in VWO which was where I was planning to put 10%. Then I want to put 10% in developed ex-Canada-USA, but Europe is freaking everybody out. I'm new to portfolio construction so I'm just looking for ideas and to see what others are doing.


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## CanadianCapitalist (Mar 31, 2009)

Loon said:


> Then I want to put 10% in developed ex-Canada-USA, but Europe is freaking everybody out. I'm new to portfolio construction so I'm just looking for ideas and to see what others are doing.


Europe is all over the news, so their troubles are not exactly a secret. In other words, the troubles are baked into the price. So, unless you have reasons to think that European troubles are not fully priced in, there is no reason to avoid European stocks. In fact, one could argue that one should be buying when an asset class is freaking out.


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## Sampson (Apr 3, 2009)

I'm also continuing to invest in Europe and Japan.

As for options, it will be difficult to find economies not affected. You could increase your allocation to Canadian and US holdings, or you could find diversification in different asset classes like fixed income, cash, real estate, or commodities.

It's hard to want to invest in developed economies and avoid ~1/4 to 1/3 of the Worlds' economy made up from Europe.


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## OhGreatGuru (May 24, 2009)

According to this http://www.patternstocks.com/2009/09/msci-etf-list.html you have couple options like this:

iShares MSCI All Country Asia ex Japan Index Fund – AAXJ

iShares MSCI Pacific ex-Japan Index Fund – EPP

But if you are going to slice & dice the EAFA like this, it's a question whether you should instead be looking at something like emerging markets :

iShares MSCI Emerging Markets Index Fund – EEM

iShares MSCI BRIC Index Fund – BKF


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## Loon (Apr 12, 2012)

CanadianCapitalist said:


> In fact, one could argue that one should be buying when an asset class is freaking out.


One could. Are you suggesting that Europe is rock bottom and ripe for the picking? 




OhGreatGuru said:


> iShares MSCI All Country Asia ex Japan Index Fund – AAXJ


I found this but the MER is 0.65%. I think I'll go VEA and ride it out, buy and hold, long time horizon and all.


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## Dibs (May 26, 2011)

Nobody will be able to call the bottom of the European crisis, or any future crisis to come with accuracy. I think CC has a point in that the Euro indexes are dropping, which means that this could be a good opportunity to get more bang for your buck. Leaving Europe out of your diversification since they are doing badly today can come back to haunt you tomorrow if everything settles down and Europe comes out with the best returns in the next few years. 

There are some great european stocks in the MSCI EAFE: Nestle, HSBC, BP, Shell, GlaxoSmithKline, BHP, etc. Think of it this way - they are all on sale right now.


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## Loon (Apr 12, 2012)

OhGreatGuru said:


> According to this http://www.patternstocks.com/2009/09/msci-etf-list.html
> iShares MSCI Emerging Markets Index Fund – EEM
> 
> iShares MSCI BRIC Index Fund – BKF


I already allocated 10% to Emerging Markets. Are these better than VWO? The seem to be expensive at 0.65% compared to 0.2% for VWO.


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## GoldStone (Mar 6, 2011)

Take a look at VXUS. It combines EAFE and Emerging Markets in one ETF. MER=0.18%. VXUS owns 6433 stocks - a lot more than the combo of VEA and VWO.

https://personal.vanguard.com/us/funds/snapshot?FundId=3369&FundIntExt=INT

http://canadiancouchpotato.com/2011/02/07/under-the-hood-vanguard-total-international-stock-vxus/


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## Loon (Apr 12, 2012)

GoldStone said:


> Take a look at VXUS. It combines EAFE and Emerging Markets in one ETF. MER=0.18%. VXUS owns 6433 stocks - a lot more than the combo of VEA and VWO.



I've seen VXUS but I didn't realize it had more stocks, plus small caps. I'm really stuck on how much granularity I should have. For my international it seems I could go all VXUS for simplicity, or VEA-VWO and maybe even add VSS for small cap. Assuming this is $50K all in RRSP, how much slicing and dicing should I do? It's a little more trading fees to rebalance vs the possibility of non-correlation.


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## Loon (Apr 12, 2012)

Thanks for the all your input. I did end up buying VGK as part of my allocation back in May and it is currently my 2nd best holding, up 20%.


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