- The iShares MSCI Sweden ETF (EWD) has a 23-year record of good returns
- EWD has a low U.S. market correlation of 0.80
- EWD has outperformed the oldest Europe ETF by 1.03% CAGR since August 2000
- EWD has outperformed the oldest EAFA index ETF by 2.89% CAGR since September 2001
- EWD has a current dividend yield of 4.82%
The iShares MSCI Sweden ETF (EWD) has had many highs and lows since it’s inception in 1996. Several times, this ETF has outperformed a basic S&P 500 index fund. Currently, EWD is slightly underperforming the US Large Cap Blend benchmark. This Sweden ETF underperformed the S&P 500 from 2001 thru 2004 and then went on to outperform for the next 13 years. This is the nature of long-term investments. Sometimes they do very well for a long time, then they don’t for a while. We are now in one of these times of underperformance. So, is the EWD worth diversifying into? One benefit of owning EWD is that its’ correlation coefficient to US Markets is relatively low at 0.80. But, low correlation alone is not a sufficient enough reason to diversify away from broad market funds such as an S&P 500 fund or an EAFA index fund. Past performance and future return expectations should be considered when making long-term investments.
In the chart below, notice the periods when EWD has underperformed and outperformed the S&P 500. The times that EWD underperformed, proved to be good times to invest in this ETF. I think we may be in one of those periods now. This zig and zag between assets like EWD and the S&P 500 can give long-term investors great opportunities to buy the one that is down in value while trimming profits in the one going up in value. This is arbitrage.
EWD vs S&P 500 index fund: MAY 1996 – March 2019
Source: https://www.portfoliovisualizer.com/
EWD vs SPY: March 21, 1996 – April 7, 2019
Source: https://www.koyfin.com/home
Although the iShares MSCI Sweden ETF (EWD) is slightly underperforming an S&P 500 index fund right now, EWD continues to outperform the major European and EAFA index funds. The iShares Europe ETF (IEV) is the oldest available broad market European ETF. EWD has outperformed IEV by 1.03% CAGR over the last 19 years. EWD also had a slightly lower correlation to U.S. markets.
EWD vs IEV vs S&P 500 index fund: August 2000 – March 2019
Source: https://www.portfoliovisualizer.com/
EWD vs IEV vs SPY: July 28, 2000 – April 7, 2019
Source: https://www.koyfin.com/home
“The MSCI EAFE Index is designed to represent the performance of large and mid-cap securities across 21 developed markets, including countries in Europe, Australasia and the Far East, excluding the U.S. and Canada. The Index is available for a number of regions, market segments/sizes and covers approximately 85% of the free float-adjusted market capitalization in each of the 21 countries.”(←) The oldest available ETF that tracks this index is the iShares MSCI EAFE ETF (EFA). EWD has outperformed EFA by 2.89% CAGR over the last 18 years. EWD also continued to have a slightly lower correlation to U.S. markets.
EWD vs IEV vs EFA vs S&P 500 index fund: September 2001 – March 2019
Source: https://www.portfoliovisualizer.com/
EWD vs IEV vs EFA vs SPY: August 17, 2001 – April 7, 2019
Source: https://www.koyfin.com/home
Another reason for long-term investors to consider the iShares MSCI Sweden ETF (EWD) is the dividend yield. This ETF currently as 12-month trailing yield of 4.83%. In a yield starved world, this high dividend rate can be important to some long-term investors. Investors should know in advance that dividends and capital appreciation are basically two sides of the same coin. Therefore, I prefer to look at the total returns of a fund rather than just the dividend yield. While EWD sports a very generous dividend, new investors to this fund should consider that more than half of this fund’s long-term returns have come from dividends. Trend traders and short-term investors will probably be very disappointed in this fund if they don’t hold it long enough to collect those dividends.
Now that we’ve seen how the iShares MSCI Sweden ETF (EWD) has performed in the past, let’s look at the stated objectives of this fund and some key statistics:
“The iShares MSCI Sweden ETF seeks to track the investment results of an index composed of Swedish equities. Exposure to large and mid-sized companies in Sweden. Targeted access to the Swedish stock market. Use to express a single country view.” (←)
- AUM: $219M
- INCEPTION DATE: MARCH 12, 1996
- BENCHMARK INDEX: MSCI SWEDEN 25/50 INDEX
- NUMBER OF HOLDINGS: 32
- 20 DAY AVERAGE VOLUME: 433k SHARES/DAY
- P/E RATIO: 15.51
- P/B RATIO: 2.08
- YIELD: 4.83%
- EXPENSE RATIO: 0.50%
EWD SECTOR WEIGHTING:
EWD TOP 10 HOLDINGS:
As a blogger and fellow investor my goal is to inform other investors of potentially good long-term investment opportunities. I do not want to persuade anyone to invest in the iShares MSCI Sweden ETF (EWD). If an investor believes single-country ETFs are too risky, they should stick to broad market funds. Investors seeking a little more dividend yield from their equity portfolio may want to consider adding EWD to their holdings. For investors seeking to diversify out of a portfolio that is overweight U.S. equities without sacrificing potential returns, you may also want to consider investing in EWD. This ETF has a proven track record of good returns and a relatively low correlation to the U.S. equity market.
Thank you for taking time to read this article. If you found it useful, please share it with a friend.
Respectfully yours, Micah McDonald, aka the Deep Value ETF Accumulator
Disclosure: We own shares of EWD, and we intend to buy more shares in the future. I am not a professional investment advisor. Please perform your own due diligence or seek assistance from a Registered Investment Advisor prior to investing in any fund mentioned in this article.
Previous Deep Value ETF Accumulator article on the Sweden ETF (EWD): NOVEMBER 27, 2017 The Sweden ETF, An Excellent Long-Term Investment Track Record (EWD) 1.1