If you find your portfolio too heavily concentrated in Canadian or U.S. stocks, there is a straightforward way to address that in 2026. A wide range of exchange-traded funds (ETFs) offer exposure to developed markets around the world.
These are not emerging markets or BRICS (Brazil, China, Egypt, Ethiopia, India, Indonesia, Iran, Russia, South Africa and the United Arab Emirates) countries. The focus here is on stable economies with established rule of law, credible monetary systems, and mature capital markets, largely across Europe and parts of Asia Pacific.
That matters more today, given the rising political risk in the U.S. and Canada’s close economic ties to it. Geographic diversification outside North America can help reduce reliance on a single region. With that in mind, here are two BMO ETFs that provide exactly that.
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Investing in EAFE markets
The first option is BMO MSCI EAFE Index ETF (TSX: ZEA).
EAFE stands for Europe, Australasia, and the Far East. In practical terms, it means developed markets outside North America, while excluding emerging markets. The underlying index captures roughly 85% of the market capitalization in this universe by focusing on large- and mid-cap stocks.
ZEA currently holds 696 companies across countries such as Japan, the United Kingdom, Switzerland, France, Germany, the Netherlands, Australia, Spain, Sweden, Italy, and Denmark. Compared with U.S. and Canadian markets, sector exposure tilts more toward financials, industrials, and healthcare.
Costs are reasonable. The ETF charges a 0.22% expense ratio, and after fees, the annualized yield sits around 2.07%. ZEA is also one of the largest ETFs in Canada, with about $11.6 billion in assets under management, which supports liquidity and long-term viability.
Investing in Europe only
If you want to focus strictly on Europe, BMO MSCI Europe High Quality Hedged to CAD Index ETF (TSX: ZEQ) is worth a look.
This ETF excludes Asia Pacific and Far East markets entirely, cutting out Japan and Australia. More importantly, it uses a quality-focused approach. Stocks are not selected solely based on size. Instead, the index screens for high return on equity, stable year-over-year earnings growth, and low financial leverage.
No single holding can exceed a 5% weight at the semiannual rebalances in May and November. The portfolio holds 126 companies, with heavy exposure to healthcare, industrials, and consumer staples. Switzerland and the United Kingdom together account for over 50% of the portfolio, followed by France, the Netherlands, Germany, Denmark, Sweden, Italy, Spain, Finland, and Norway.
The trade-off is cost. ZEQ charges a higher 0.45% management expense ratio and offers a lower yield of about 1.65%. Still, long-term results have been competitive. Over the past 10 years, total returns with dividends reinvested have compounded at roughly 8.4%.
