While it is unlikely that highly correlated assets like U.S. stocks and European/Pacific equities would decouple the way that the developed and undeveloped markets have, many European stock ETFs are 15%-25% cheaper than their U.S. counterparts (on a P/E basis). It follows that, hypothetically speaking, a fund like iShares MSCI European Monetary Union (EZU) might gain 18%-20% in a year where the S&P 500 SPDR Trust (SPY) collects 6% (1/3 of which came via dividends).

Allocating to iShares Small Cap EAFE (SCZ) may be particularly rewarding. It trades at a 40% P/E discount to the iShares Russell 2000 Small Cap Fund (IWM). And while small caps are trading at a premium to large caps stateside, the opposite is true for developed Europe/Asia/Far East (EAFE).

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Certified Financial Planner Gary A. Gordon, MS, is the president of Pacific Park Financial, an SEC-registered investment adviser in California. He has more than 23 years of experience as a personal coach in money matters, including risk assessment, small-business development and portfolio management, and has taught finance in Mexico, Singapore, Hong Kong, Taiwan and the U.S. He wrote the draft copy for Maverick Investing, a McGraw-Hill publication, and writes commentary for Seeking Alpha in addition to ETF Expert, for which he also hosts the ETF Expert Radio Podcast.

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