In the last few weeks, US shares have been volatile as investors get used to the idea that the tariffs trade war between the US and several other countries could have negative knock-on effects.
Trump himself has indicated that the coming period could be an "adjustment period" for the US, while the US stock market is not his measure of success.
For the last 15 years, I'd say the US share market has been the place to be in terms of exchange-traded funds (ETFs). But investing in European shares could be another way to diversify the portfolio.
The European share market may appeal to investors wanting exposure to international shares without including US shares. That's why the following European shares ETFs could be worth considering.
Vanguard FTSE Europe Shares ETF (ASX: VEQ)
The idea of this ETF is that it provides low-cost exposure to companies listed in major European markets.
A number of countries are represented within the portfolio, which I think provides useful diversification. That includes the UK (24.4% of the portfolio), France (15.8%), Switzerland (14.3%), Germany (14%), the Netherlands (6.4%), Sweden (5.7%), Italy (4.8%), Spain (4.2%), Denmark (4%), Finland (1.6%), Belgium (1.6%), Norway (1.3%), Poland (0.7%), Austria (0.5%), Ireland (0.4%), and Portugal (0.3%).
As you can see, there's significant geographic diversification – the businesses are not just from one country like the US.
This portfolio includes more than 1,200 businesses, more than twice the number of holdings the iShares S&P 500 ETF (ASX: IVV) gives exposure to.
While the ETF doesn't own US tech giants, the top holdings still contain compelling businesses with global growth aspirations.
Here are some of the biggest European shareholdings in the fund: SAP, ASML, Novo Nordisk, Roche, Nestle, AstraZeneca, Novartis, Shell, HSBC, and LVMH Moet Hennessy Louis Vuitton.
While the VEQ ETF is not as low-cost as some other options, its annual management fee is still relatively low, at 0.35%.
The dividend yield is quite pleasing at 3% as of 31 January 2025, according to Vanguard. That's not huge, but large enough to be noticeably superior to the US share market. The IVV ETF had a dividend yield of 1.06% as of 7 March 2025.
While this fund may not deliver huge returns, it could be a useful option for diversification purposes, reducing Aussies' reliance on US shares and giving them international share exposure.
