Which is a Better Invesment – Germany or U.K.?

The U.K. and Germany are two of the largest economies in Europe. In terms of investment returns, Germany is well ahead of the UK in the past five years as shown in the chart below:


Source: MSCI Barra

The chart compares the performance of MSCI country index for Germany and the UK in dollar terms. British equities fell more than German equities during the financial crisis. Over the past five years, German stocks have performed better than British stocks. The 1-year and 5-year annual average returns are 4.25% and 5.28% for Germany compared to 7.69% and -2.28% for UK.

The iShares MSCI Germany Index Fund (EWG) tracks the  MSCI Germany Index.The fund has an asset base of $1.5B and financials account for 18% of the portfolio.Year-to-date the ETF is down 1.78%

The iShares MSCI United Kingdom Index Fund (EWU) tracks the  MSCI index for UK.The fund has an asset base of about $984M and financials account for 21% of the portfolio.The fund allocation for industrials is 5% compared to 15% in EWG. Year-to-date the fund is up 0.63%.

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