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Want to Diversify Outside of U.S. Stocks? Invest in This Market-Beating European ETF

Investing in an exchange-traded fund (ETF) that is made up of European stocks is a good way for U.S. investors to diversify their portfolios. Oftentimes when diversifying, investors might target different industries and sectors but may omit geographical diversification, which can be just as important. Different economic factors can play a big role in how businesses on opposite sides of the ocean perform.

A good ETF to consider and which has been doing well this year is the SPDR Euro Stoxx 50 ETF (NYSE Arca:FEZ). It has excellent exposure to Europe with some of the top companies in the continent being in its portfolio. As its name suggests, there are 50 holdings in this fund. This includes luxury company LVMH Moet Hennessy Louis Vuitton SE (OTC:LVMUY), healthcare company Sanofi (NASDAQ:SNY), technology business Siemens (OTC:SIEGY), and many other big names. There's some excellent geographical diversification within the fund as the stocks are based in many different countries, including France, Germany, Netherlands, Spain, Italy, and others. The fund is also diverse in terms of sectors, with consumer discretionary stocks accounting for 20% of its weight, followed by financials at 17% and information technology at 15%.

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This year, the fund has been a hot buy, generating total returns (including dividends) of 19% -- far above the S&P 500's gains of around 7% over the same time frame. For investors looking for some great diversification into the European market, the Euro Stoxx 50 ETF is a great choice as it also has a fairly low expense ratio of 0.29%.