Investor concerns continue to mount over high debt levels in many European countries. That’s especially true of the so-called PIIGS countries (Portugal, Italy, Ireland, Greece and Spain).

Right now, the European Union and International Monetary Fund are working on a bailout of Greece. However, negotiations are moving slowly, mainly because Germany, which would shoulder most of the bailout, is insisting that the Greek government sharply cut its spending before any restructuring can go forward.

Most European economies still need considerable reform

We’ve long recommended that Canadian investors be very selective about global stock market investing in Europe, and limit their European holdings to a smaller portion of their portfolios, no more than 10%, say.

As we said, many of Europe’s major economies, especially the PIIGS countries, still need major structural reforms. These reforms include cutting social spending and removing outmoded job-protection laws, plus measures to lower both business and personal tax rates. That dramatically limits their appeal for global stock market investing.

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Look closer to home for lower-risk gains

We continue to recommend that most investors hold the bulk of their portfolios in Canadian stocks. That’s because, unlike many European economies, Canada has a number of strengths that have helped it weather the economic downturn — and put its economy in position to profit as the global economic recovery gains steam.

For one, the stability of Canada’s banking system has caught international attention: The big-five Canadian banks had limited exposure to the complicated, risky financial products that brought down many international banks. Canada’s banks have long demonstrated an ability to identify and stay out of these types of arrangements.

That’s another good reason why we continue to recommend all five big Canadian bank stocks in our investment services and newsletters.

As well, Canada cut its corporate tax rate to 31.32% in 2009. That’s a 0.4% decrease. This has further served to support the country’s economy, and helped attract jobs and economic growth.

To top it off, Canadian investors benefit from the dividend tax credit. In contrast, you pay tax at the same rate as ordinary income on the full amount of your foreign dividends, including Europe.

A lower-risk way of global stock market investing in Europe

If you want to do some global stock market investing in Europe, we think the best way to do so is through exchange-traded funds (ETFs). We cover a carefully selected group of ETFs in Canadian Wealth Advisor, our newsletter for safety-conscious investors. One of them is the IShares MSCI Germany Fund (symbol EWG on New York).

Exchange traded funds are set up to mirror the performance of a stock-market index or sub-index. They hold a more-or-less fixed selection of securities that represent the holdings that go into the calculation of the index or sub-index. Exchange traded funds trade on stock exchanges, just like stocks.

The IShares MSCI Germany Fund’s top holdings are Siemens AG (engineering conglomerate), 10.3%; E.ON AG (energy), 8.9%; Allianz (insurance), 7.0%; BASF (chemicals), 7.0%; Bayer AG (diversified chemicals), 6.9%; Deutsche Bank AG, 5.3%; Daimler AG (automobiles), 5.2%; SAP AG (software), 4.8%; Deutsche Telekom, 4.6% and RWE AG (energy and waste disposal), 4.3%.

Exports account for around 45% of Germany’s economy, so it needs a continued global recovery to sustain its growth. Even though many European countries are struggling (including Portugal, Italy, Ireland, Greece and Spain), the German economy is steadily recovering.

You can get our full analysis of this exchange-traded fund and a wide range of other investments, including income trusts and tax-advantaged investments, in Canadian Wealth Advisor. What’s more, you get one month free when you subscribe today. Click here to learn how.