VGK offers the lowest-cost broad exposure to European equities, while IEUR provides broader small-cap coverage. SPEU is a competitive alternative, and HEDJ may suit investors seeking to limit euro-related currency risk.
European equities can help U.S. investors diversify beyond the highly concentrated American stock market. Europe offers substantial exposure to financial services, industrial companies, healthcare, consumer goods, energy and defence—sectors that are less dominant in technology-heavy U.S. indices.
Investing in Europe, however, involves more than simply selecting the ETF with the strongest recent performance. Investors should compare geographic coverage, expenses, currency exposure, sector concentration, liquidity and tax structure.
For most U.S. taxpayers, the practical approach is to purchase a U.S.-domiciled ETF that invests in European shares, rather than buying a European-domiciled UCITS ETF.
Best European ETFs at a glance
| ETF | Ticker | Expense ratio | Exposure | Best suited to |
|---|---|---|---|---|
| Vanguard FTSE Europe ETF | VGK | 0.06% | Broad developed Europe | Low-cost long-term exposure |
| SPDR Portfolio Europe ETF | SPEU | 0.07% | Broad European market | Low-cost alternative to VGK |
| iShares Core MSCI Europe ETF | IEUR | 0.10% | Large-, mid- and small-cap Europe | Broadest core exposure |
| SPDR EURO STOXX 50 ETF | FEZ | 0.29% | 50 eurozone blue chips | Concentrated eurozone allocation |
| iShares MSCI Eurozone ETF | EZU | 0.50% | Broad eurozone equities | Diversified eurozone exposure |
| WisdomTree Europe Hedged Equity Fund | HEDJ | 0.58% | Eurozone exporters, USD-hedged | Reducing euro currency exposure |
| Franklin FTSE Germany ETF | FLGR | 0.09% | German equities | Low-cost country allocation |
Expense ratios reflect fund information available on August 4, 2026 and may change. Investors should consult the latest prospectus before purchasing.
Why invest in European equities?
The U.S. stock market represents a large part of global equity value, but concentrating an entire portfolio in one country creates economic, sector and valuation risks.
Europe provides access to global businesses operating in industries such as:
- banking and insurance;
- pharmaceuticals;
- industrial automation;
- aerospace and defence;
- luxury goods;
- energy;
- food and consumer products;
- telecommunications;
- automotive manufacturing;
- semiconductor equipment.
Many leading European companies earn a substantial proportion of their revenue outside their domestic markets. Buying a European ETF therefore provides exposure not only to the European economy but also to multinational businesses with worldwide operations.
European stocks often trade at lower valuation multiples than comparable U.S. companies. A lower valuation does not guarantee superior returns, however. Differences can reflect slower economic growth, political fragmentation, sector composition or weaker corporate profitability.
VGK: best low-cost European ETF for most investors
The Vanguard FTSE Europe ETF, trading under the ticker VGK, is arguably the strongest default choice for U.S. investors seeking broad European equity exposure.
VGK follows the FTSE Developed Europe All Cap Index. Its portfolio includes large-, mid- and small-cap companies across major developed European markets.
The fund’s principal advantages are:
- an expense ratio of only 0.06%;
- more than 1,200 holdings;
- substantial assets under management;
- broad country and sector diversification;
- exposure to both eurozone and non-eurozone markets;
- a long operating history dating to 2005.
Its largest markets typically include the United Kingdom, France, Switzerland, Germany and the Netherlands. Major holdings have included ASML, HSBC, Roche, Novartis, AstraZeneca, Nestlé, Siemens, Shell, Santander and Allianz.
At an expense ratio of 0.06%, a hypothetical $100,000 investment would incur approximately $60 in annual fund operating expenses, excluding trading costs and changes in portfolio value.
VGK does not hedge its foreign-currency exposure. Returns for an American investor are therefore affected by movements in the euro, British pound, Swiss franc and other European currencies against the U.S. dollar.
Verdict: VGK is the best overall European ETF for many long-term U.S. investors because it combines very low costs, broad diversification and substantial scale.
Detailed information is available on Vanguard’s official VGK page.
SPEU: a strong low-cost alternative
The SPDR Portfolio Europe ETF, or SPEU, tracks the STOXX Europe Total Market Index.
With an expense ratio of 0.07%, it is only marginally more expensive than VGK and significantly cheaper than many older regional ETFs.
SPEU provides diversified access to developed European companies across multiple countries and industries. Its advantages include:
- a competitive expense ratio;
- broad European coverage;
- a portfolio suitable for long-term allocation;
- a U.S.-domiciled structure;
- straightforward trading through American brokerage accounts.
Its asset base and trading activity are smaller than VGK’s. Investors making large transactions should therefore compare bid-ask spreads and use limit orders when appropriate.
The 0.01-percentage-point annual fee difference between VGK and SPEU is unlikely to determine long-term results by itself. Index composition, tracking difference, spreads and portfolio fit may prove more important.
Verdict: SPEU is an attractive low-cost alternative to VGK, particularly for investors who prefer its underlying STOXX index.
Current characteristics are available from State Street’s official SPEU page.
IEUR: best for comprehensive European market coverage
The iShares Core MSCI Europe ETF, trading as IEUR, tracks the MSCI Europe Investable Market Index.
Unlike funds concentrated primarily in the largest European corporations, IEUR includes large-, mid- and small-cap companies. Its portfolio contains more than 1,000 securities and provides broad exposure to developed European markets.
The fund charges an expense ratio of 0.10%. Although slightly more expensive than VGK and SPEU, it remains inexpensive for a diversified international equity ETF.
IEUR may appeal to investors who want:
- exposure across the European market-capitalisation spectrum;
- a substantial allocation to smaller companies;
- broad country diversification;
- an established U.S.-listed fund;
- a core European holding rather than a tactical trade.
Small-cap exposure can increase diversification and provide access to companies more closely connected to domestic European economies. It can also introduce higher volatility and lower liquidity within the underlying portfolio.
Verdict: IEUR is one of the best choices for investors prioritising comprehensive market coverage, including European small-cap stocks.
Official fee and portfolio information is available from iShares.
FEZ: concentrated exposure to eurozone blue chips
The State Street SPDR EURO STOXX 50 ETF, or FEZ, tracks 50 large companies from eurozone countries.
This makes FEZ substantially more concentrated than VGK, SPEU or IEUR. It excludes major companies from the United Kingdom and Switzerland because those countries do not use the euro.
The ETF may appeal to investors who specifically want exposure to leading eurozone corporations rather than the complete European market.
Its advantages include:
- a focused portfolio of established blue-chip companies;
- strong representation from France, Germany, the Netherlands, Spain and Italy;
- a long history dating to 2002;
- an active options market;
- relatively straightforward eurozone exposure.
Its 0.29% expense ratio is higher than those of the broad-market alternatives. Concentration in only 50 companies also means individual holdings have a greater effect on performance.
Verdict: FEZ is useful for a tactical or concentrated eurozone allocation, but it is less diversified and more expensive than the strongest broad-market choices.
See the official FEZ fund page.
EZU: broader eurozone exposure
The iShares MSCI Eurozone ETF, ticker EZU, invests in large- and mid-cap companies located in countries using the euro.
It provides more holdings than FEZ and is consequently less concentrated in the very largest corporations. However, its expense ratio of 0.50% is high compared with VGK, SPEU and IEUR.
EZU can serve investors who deliberately want to exclude the United Kingdom, Switzerland and other non-euro European markets.
That distinction matters because the fund’s results depend more directly on eurozone:
- economic growth;
- monetary policy;
- banking conditions;
- government finances;
- corporate earnings;
- political developments.
Verdict: EZU provides useful diversified eurozone exposure, but its relatively high fee makes it less attractive as a general European core holding.
Fund details are available from iShares’ official EZU page.
HEDJ: best for managing euro currency exposure
The WisdomTree Europe Hedged Equity Fund, or HEDJ, combines European stocks with a currency-hedging strategy.
The fund focuses on dividend-paying companies based in the eurozone that generate more than half of their revenue outside Europe. This creates a pronounced exporter orientation.
HEDJ uses currency forward contracts to reduce the effect of changes between the euro and the U.S. dollar.
The strategy can be beneficial when:
- the U.S. dollar strengthens against the euro;
- European exporters benefit from a weaker euro;
- investors want European equity exposure without taking full euro currency risk.
Currency hedging can become a disadvantage when the euro appreciates. HEDJ may then underperform an otherwise similar unhedged portfolio because the hedge limits the benefit American investors receive from a stronger European currency.
The fund’s 0.58% expense ratio is also considerably higher than those of VGK, SPEU and IEUR.
HEDJ is not simply a currency-hedged version of the complete European market. Its dividend and exporter selection rules create meaningful differences in sector composition and company exposure.
Verdict: HEDJ is the best specialist option for investors seeking eurozone exporters combined with U.S.-dollar currency hedging, but it is not the lowest-cost core European ETF.
See WisdomTree’s official HEDJ page.
FLGR: low-cost exposure to Germany
The Franklin FTSE Germany ETF, or FLGR, offers targeted exposure to German large- and mid-cap companies.
Its expense ratio of 0.09% is unusually low for a single-country ETF.
Germany offers exposure to industrial manufacturing, software, insurance, automotive businesses, chemicals, telecommunications and global exporters. However, a country-specific allocation is significantly less diversified than a Europe-wide ETF.
The German market can be especially sensitive to:
- global industrial demand;
- Chinese economic activity;
- energy prices;
- automotive competition;
- European trade policy;
- the euro exchange rate;
- domestic fiscal and infrastructure policy.
Verdict: FLGR is a cost-efficient satellite holding for investors with a specific positive view of German equities, but it should not normally replace a diversified European ETF.
Current information is available from Franklin Templeton.
Should U.S. investors buy European UCITS ETFs?
American investors may encounter Irish-, Luxembourg- or other European-domiciled UCITS ETFs that appear to offer similar exposure.
For a U.S. taxpayer, purchasing such a foreign fund can create significant tax and reporting complications. A non-U.S. ETF may be classified as a Passive Foreign Investment Company, or PFIC.
Depending on the circumstances, PFIC ownership can involve:
- filing IRS Form 8621;
- complex annual calculations;
- special taxation of distributions or gains;
- potentially unfavourable tax rates;
- additional accounting expenses;
- separate reporting for each foreign fund.
The IRS states that U.S. persons who directly or indirectly own a PFIC may be required to file Form 8621 when receiving certain distributions, disposing of the investment, reporting specific elections or meeting other filing conditions. The complete requirements appear in the IRS Form 8621 instructions.
Consequently, U.S. investors generally have a strong practical reason to use U.S.-domiciled ETFs such as VGK, SPEU, IEUR, FEZ, EZU or HEDJ for European exposure.
PFIC taxation is complex and depends on the investor’s individual circumstances. Anyone considering a foreign-domiciled ETF should consult a qualified U.S. tax adviser.
How currency movements affect returns
An ETF trading in U.S. dollars is not necessarily protected against foreign-currency movements.
VGK, SPEU and IEUR hold European companies whose shares and earnings are connected to currencies including:
- the euro;
- British pound;
- Swiss franc;
- Swedish krona;
- Danish krone;
- Norwegian krone.
If European currencies strengthen against the dollar, that movement can increase dollar-denominated returns. If they weaken, it can reduce returns.
A fund’s exchange-listing currency describes how investors buy and sell its shares. It does not, by itself, eliminate currency exposure.
HEDJ addresses part of this risk through hedging, but the hedge creates additional costs and can reduce returns when the euro appreciates.
Key risks of European ETFs
Slower economic growth
European economies may grow more slowly than the United States because of demographics, regulation, productivity trends and lower exposure to fast-growing technology industries.
Political fragmentation
European markets are influenced by national governments, European Union institutions and the European Central Bank. Elections, fiscal disputes and regulatory changes can affect investor confidence.
Currency risk
Unhedged funds expose American investors to movements between the dollar and European currencies.
Sector concentration
European indices generally contain more financial, industrial, healthcare and consumer companies—and fewer technology businesses—than the U.S. market.
Energy and geopolitical risk
Europe remains sensitive to energy prices, trade disruptions and geopolitical tensions involving neighbouring regions.
Dividend taxation
European governments may impose withholding taxes on dividends paid to the fund. Tax treaties, fund structure and portfolio location can affect how much income ultimately reaches shareholders.
Market risk
Diversification does not prevent losses. Every ETF discussed in this comparison can decline substantially during a recession, banking crisis or broad equity correction.
Which European ETF should investors choose?
The appropriate choice depends on the investor’s objective:
- Best overall low-cost ETF: VGK.
- Best low-cost alternative: SPEU.
- Best comprehensive market coverage: IEUR.
- Best concentrated eurozone blue-chip ETF: FEZ.
- Best broader eurozone ETF: EZU.
- Best currency-hedged strategy: HEDJ.
- Best targeted German ETF: FLGR.
For most long-term U.S. investors, VGK, SPEU or IEUR will provide the most practical core exposure.
VGK has the lowest expense ratio and substantial scale. SPEU offers similarly inexpensive broad coverage. IEUR costs slightly more but provides extensive exposure across large-, mid- and small-cap European companies.
FEZ, EZU, HEDJ and FLGR are more specialised. They may be useful as satellite positions, but their geographic, strategic or company-level concentration makes them less suitable as default European holdings.
The final decision should also reflect the investor’s wider portfolio. Someone already holding a global ex-U.S. or developed-markets ETF may already have a significant European allocation and might not require a separate regional fund.
This article is provided for informational purposes only and does not constitute personalised investment, tax or legal advice. ETF fees, holdings, tax rules and availability can change. Investors should review the latest prospectus and consult an appropriate adviser before investing.
Sources: Vanguard—VGK, State Street—SPEU, iShares—IEUR, State Street—FEZ, iShares—EZU, WisdomTree—HEDJ, Franklin Templeton—FLGR, IRS—Form 8621 instructions
