Which Global Equity ETFs Can You Buy? Here are some options …
Vanguard MSCI International Equity ETF (VGS / ASX)
This one buys you a slice of 1505 companies worldwide (excluding Australian companies), of which around 68% are based in the United States, including Apple, Microsoft, Amazon, Alphabet (Google) and Facebook.
In technical terms, the fund seeks to mimic the returns of MSCI World Index excluding Australia. MSCI is an American finance and analysis firm (formerly Morgan Stanley Capital International), which creates indices to track things.
VGS has an annual management fee of 0.18%, which is higher than ETFs that track the ASX 200 index (0.07-0.13%), but low compared to actively managed ETFs. .
“It’s a great and relatively inexpensive way to access the rest of the developed world stock markets, including the US, Canada, UK, Japan, France and Switzerland,” says Scott Phillips , chief investment officer at The Motley Fool.
“All of a sudden you have an effective stake in companies such as Tesla, Nestlé, Sony, AstraZeneca and around 1,500 others; high-quality companies that are worth fully owning, while offering sector, geographic and monetary diversification.
S&P World SPDR ETF outside Australia (WXOZ / ASX)
This gives you exposure to over 1,500 of the world’s largest companies.
It is managed by State Street Global Advisors and seeks to replicate the returns of a benchmark index called the S&P Developed ex-Australia Large-MidCap (AUD) Index, which represents approximately 85% of the total market capitalization of global developed markets. .
It comes with a slightly higher management fee of 0.3 percent.
IShares Global 100 ETF (IOO / ASX)
This tracks companies in the S&P Global 100 Index, which the BlackRock website describes as the “100 Blue-Chip Multinational Companies of Major Importance in Global Equity Markets”.
iShares is owned by BlackRock, the world’s largest issuer of index funds.
It has a higher management fee of 0.4% but, despite this, it is the preferred global equity ETF of Stockspot founder Chris Brycki, who invests his clients’ money in it, plus an emerging markets ETF, to gain full international exposure.
Brycki says IOO’s performance over the past five to six years has surpassed that of larger indexed international equity ETFs. Why? Because large companies (especially in the United States) have tended to outperform.
“In an environment where small caps are doing better, then some of these larger ones will do better,” he said.
For exposure to a wider range of emerging economies, such as China and India, Brycki says that an IOO investment can be complemented by an ETF in emerging markets, such as the IShares ETF MSCI Emerging Markets and Vanguard Emerging Markets Equity Index Fund.
It should be noted that no international stock pays you “straight” dividends like Australian stocks. However, this must be weighed against the benefits of diversification. Brycki also notes that dividends have become a smaller source of total return in recent years, both here and abroad.
It’s also worth noting that the three ETFs I’ve described – VGS, WXOZ, and IOO – are not all hedged against currency fluctuations. This means that your returns on your investment will be impacted by fluctuations in the Australian dollar against other currencies.
However, that’s not necessarily such a bad thing, says Morningstar’s Matt Wilkinson.
“A hedged will likely dampen returns in the long run, as the AUD / USD often moves in the same direction as global growth,” he said.
All three ETFs are also domiciled in Australia, which means you only have to deal with the Australian tax system when investing.
If you don’t mind having additional paperwork and exposure to the US tax system, you can also invest in very low cost US domiciled ETFs that are listed on our exchange. For example, you can buy ASX listed iShares S&P 500 ETF AUD (IVV / ASX), which tracks the S&P 500 benchmark for ultra-low management fees of just 0.04%. You can add exposure to the rest of the world by also purchasing the Vanguard All-World ex-US Shares Index ETF AUD (VEU / ASX), which tracks the MSCI All World ex-US index for a management fee of just 0.09%.
For those interested in ethical investing, iShares also offers a Global Equity ETF that tracks an “ESG Leaders” Index – ETF iShares Core MSCI World Ex Aus ESG Leaders (IWLD / ASX) – for a pretty low 0.1 percent fee. “Basically an ESG focus on international investing,” explains Shani Jayamanne, Morningstar investment specialist.
Of the more than A $ 100 billion invested in ETFs, more than half have been invested in international stocks. It is worth considering as part of a balanced portfolio.
- The advice given in this article is general in nature and is not intended to influence readers’ decisions regarding investments or financial products. They should always seek their own professional advice that takes their personal circumstances into account before making any financial decisions.