Follow Vanguard Investment Styles With These ETFs

Amid the global stock market turmoil which started at the onset February, tracking an asset management behemoth could be the desire of many. Vanguard is one of the world's largest investment management companies with $4.9 trillion worth of global assets under management (as of Dec 31, 2017). The company is known especially for its low-cost exchange-traded funds.

So, Vanguard’s investment picks may come to the rescue, especially of those who do not have a strong stomach for risks (read: 5 ETFs Behind Vanguard's Success in 2017).

Cherry Pick Japan

Vanguard Group recently indicated that “a pickup in Japanese prices will boost the country’s equities, unlike in the U.S. where fears over inflation sent shares tumbling into a correction.”

Consumer prices in Japan increased 1.0% year over year in December 2017, up from a 0.6% nudge-up in the previous month and slightly below expectations of a 1.1% increase. It was the highest rate since March of 2015.

Also, Japanese stocks appear to have cheaper valuation. As per a source, in 2013, Japanese stocks were 60% pricier than American ones, going by the EV/EBITDA multiple. But currently, Japanese stocks are trading on an EV/EBITDA ratio of 8.4, which is 51% cheaper than the ratio in the United States (read: 5 Reasons to Buy Japan ETFs).

The likelihood of higher prices and cheap valuations make Vanguard “most positive” about Japanese stocks.

Investors can thus play products like First Trust Japan AlphaDEX Fund FJP, Goldman Sachs ActiveBeta Japan Equity ETF GSJY, Deutsche X-trackers Japan JPX-Nikkei 400 Equity ETF JPN, Franklin FTSE Japan ETF (FLJP and WisdomTree Japan SmallCap Dividend DFJ. Given the recent strength in yen, it is better not to have a focus on currency-hedged ETFs, at this moment.

Eager on Europe

Along with Japan, Vanguard bets big on Europe. The asset manager expects “those regions -- and almost everywhere else -- to do better than the U.S. in the long run.” The European Union economy expanded at its quickest clip (2.5%) in a decade in 2017, as per figures from the EU statistics office Eurostat. It was the region’s strongest performance since 2007, when it grew 2.7%.

In the fourth quarter of 2017, both the EU and the 19-nation eurozone expanded by 0.6% sequentially. Overall in 2017, the Euro zone grew by 2.5% while the U.S. economy grew 2.3% in 2017.

Products like First Trust United Kingdom AlphaDEX Fund FKU, SPDR MSCI Germany StrategicFactors ETF QDEU, BLDRS Europe Select ADR Index Fund ADRU and Global X MSCI Norway ETF NORW are some of the trending ETFs in the Europe space (read: ECB Meeting Puts These Euro ETFs in Focus).

Cautious Stance on Emerging Markets

Though emerging markets are cheaper than Japan and has been going steady on a subdued greenback, commodity market strength and synchronized global growth, Vanguard is “more cautious” about them. The year 2018 started with lower investors risk appetite and if volatility levels flare up, emerging markets may not live up to high investors’ expectations.

Still, if investors are keen on playing the space, they can try low-risk and more strategic funds like iShares Edge MSCI Multifactor Emerging Markets ETF EMGF, FlexShares Currency Hedged Morningstar EM Factor Tilt Index Fund TLEH and WisdomTree Emerging Markets Dividend Fund DVEM.

Less-Optimistic on Global Stocks

As per the article published on Bloomberg, Vanguard is less optimistic on global stocks. The money manager reduced its 10-year global equity return outlook to a range of 4.5% to 6.5% in December, down from 5% to 8%. After a nice run in 2017, may be the markets are fairly-valued now and are likely to offer moderate returns ahead.

Still, investors wanting to try their luck in trending products may target Renaissance International IPO ETF IPOS, Principal Millennials Index ETF GENY, Davis Select Worldwide ETF DWLD, SPDR MSCI World StrategicFactors ETF QWLD and Hartford Multifactor Global Small Cap ETF ROGS.

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SPDR-MSCI WSF (QWLD): ETF Research Reports
 
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ISHARS-FS MSCI (EMGF): ETF Research Reports
 
WISDMTR-JP SC D (DFJ): ETF Research Reports
 
GLBL-X NORWAY (NORW): ETF Research Reports
 
PRIN-MILLNLS (GENY): ETF Research Reports
 
BLDRS-EURO 100 (ADRU): ETF Research Reports
 
FT-JAPAN AD (FJP): ETF Research Reports
 
SPDR-MSCI GSF (QDEU): ETF Research Reports
 
GS-ACTBTA JP EQ (GSJY): ETF Research Reports
 
FLEXS-CH MEMFT (TLEH): ETF Research Reports
 
DAVIS-SEL WW (DWLD): ETF Research Reports
 
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