The top five holdings in this fund are: Nestle SA (NESN, 2.27% of assets); Roche Holding AG Dividend Right Cert. (ROG, 1.47%); Novartis AG (NOVN, 1.30%); Toyota Motor Corp (7203, 1.11%); and HSBC Holdings PLC (HSBA.L, 1.06%). The ETF has a current annual dividend yield of 2.99%, paid twice yearly.
iShares MSCI EAFE ETF (EFA)
From Successful Investing
This earnings season has been far better than many feared when we started the quarter. That’s because many analysts had a high degree of trepidation going into the quarter due to slowing economic data and the potentially negative effects on corporate top- and bottom-lines due to the tariffs and the trade war. And though we did see many China-related multinationals come in weaker due to trade tensions, for the most part, the tariffs have yet to affect consumer spending. That is what has kept the economy growing this year.
The result of the week’s bull move can be seen in our key measures of U.S. and international equity markets. Here, we saw the Domestic Fund Composite (DFC) climb another 0.60%, while the International Fund Composite (IFC) more than doubled that gain, rising 1.22%.
In fact, the move higher in the IFC has now taken the index above its 5% upside collar of 219,276.37. What this means is that the collars on the IFC have now been removed, and we are back to the original rules of the International Plan, using only the 39-week moving average to determine “buy” or “sell” status.
Of course, we are in a firm “buy” in the International Plan, and as such we now have a green light to add the final 10% allocation that we currently have in cash in the Growth Portfolio into international equities.
I want you to buy the iShares MSCI EAFE ETF (EFA), at market, with the remaining 10% of the money you now have allocated to cash in your Growth Portfolio.
This fund is perhaps the benchmark international equity exchange-traded fund (ETF), since it is based on the MSCI EAFE Index, which is composed of large- and mid-cap companies that are listed across 21 overseas developed markets. Its market-cap-weighted approach benefits investors by capturing the market’s collective opinion of each stock’s value while mitigating turnover and trading costs. EFA holds more than 900 stocks, with the 10 largest companies representing 13% of the portfolio.
The recent price action has been very bullish, with the shares breaking out to new 52-week highs. This is the result of a combination of recent weakness in the dollar (international stocks do better with a weaker dollar) and a more upbeat global economic picture.
And as we’ve seen with our International Fund Composite’s move over the past few weeks, the segment has now broken out of its collar constraints and gave us permission to add international exposure to the Growth Portfolio.
Jim Woods, Successful Investing, CustomerService@JimWoodsInvesting.com, 1-800-211-4766, November 1, 2019