So You Want the EAFE Index?

I had today's post all planned out. Then I hit Roger Nusbaum's post this morning, followed the link to an article on Seeking Alpha about a WisdomTree ETF, did a bit of research, and thought WOW.

The article mentioned the DWM ETF, which is a Wisdomtree-ized version of the EAFE index. Many people use the EFA ETF to invest in this index, which covers developed markets in Europe, the Far East, and "Australasia." DWM has a 4% dividend! Note: Wisdomtree's website lists the index yield as 3.59%; I don't have an obvious reason for the discrepancy.

That stat caught my eye, so I did some research. First, look at the lovely chart from Wisdomtree comparing the indexes:

SHOCKING. Someone created a new index to sell, and it beats the existing index, eh? But let's face facts, 50% better performance over the last 10 years and a current yield of 4% is nothing to sneeze at.

What are the differences?
Expense ratio: DWM = 0.48%, EFA = 0.35%
Total assets: DWM = $232m, EFA = $47b
Yield: DWM = 3.59%, EFA = 1.9%
P/E: DWM = 15, EFA = 18
Top 5 countries in order: DWM = U.K., France, Australia, Japan, Italy. EFA = U.K., Japan, France, Germany, Switzerland.

What's good:
The theoretical performance
If you think dividends are a good indicator of a healthy company, you may like Wisdomtree's indexes.


What's bad:
Wisdomtree's ETFs have no real history. Yes, they've got back data for the indexes, but as you've heard, past results do not indicate future performance.
The total assets in Wisdomtree's ETFs are pretty small. I doubt you'd have any trouble buying/selling the shares of the ETF, but it's still something to take note of.

It's certainly an interesting investment. If you're invested in EFA, dropping a few percent into DWM could boost your performance.