Introduction

Investing in global stocks is a popular way to diversify your portfolio and benefit from the growth of the world economy. But how do you choose the best world ETF to invest in? There are hundreds of ETFs that track the global stock market, each with their own characteristics, costs and performance.

In this article, we will discuss the 5 best world ETFs that you can consider investing in. We will compare their key features, such as the index they track, the costs, the distribution across regions and sectors, and the long-term return.

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What is a world ETF?

A world ETF is an investment fund that owns a basket of stocks from different countries around the world. A world ETF aims to mimic the performance of a global stock index, such as the MSCI World Index or the FTSE All-World Index. These indices include stocks from both developed and emerging markets, and have a large diversity of sectors and company sizes.

A world ETF offers investors a simple and cheap way to get exposure to the global stock market.

Why invest in a world ETF?

Investing in a world ETF has several advantages, such as:

• Diversification: By investing in a world ETF, you spread your risk across different countries, regions, sectors and companies. This reduces the impact of local shocks or crises on your portfolio.
• Growth: By investing in a world ETF, you benefit from the growth of the world economy and the innovation of companies across the world. You can also benefit from emerging markets that grow faster than developed markets.
• Costs: By investing in a world ETF, you save on transaction costs, currency costs and administrative costs that come with buying and selling individual stocks or funds from different countries.
• Convenience: By investing in a world ETF, you don’t have to do your own research on individual stocks or funds, or adjust your portfolio constantly to changing market conditions. You can just buy one fund that follows the whole market.

How to choose the best world ETF?

To choose the best world ETF, you need to consider various factors, such as:

• The index which the ETF follows: The index determines which stocks the ETF owns, how much they weigh in the portfolio, and how often they are rebalanced or replaced. Some indices are broader than others, and some are more focused on certain regions, sectors or company sizes.
• The costs of the ETF: The costs of the ETF include the total expense ratio (TER), which is the annual fee that the ETF charges for managing the fund, and the tracking difference, which is the difference between the performance of the ETF and the index. The lower the costs, the better for your returns.
• The liquidity of the ETF: The liquidity of the ETF refers to how easily you can buy and sell the ETF on the market, without affecting its price. The higher the liquidity, the better for your convenience and flexibility.
• The tax efficiency of the ETF: The tax efficiency of the ETF refers to how much tax you have to pay on the dividends and capital gains that the ETF generates. The tax efficiency depends on the domicile of the ETF, the tax treaty between the ETF’s country and your country, and your personal tax situation. The higher the tax efficiency, the better for your returns.

The 5 best world ETFs

Here are the 5 best world ETFs that we have selected based on the criteria above. We have also included some information on their performance, risk and dividend policy.

iShares Core MSCI World UCITS ETF USD (Acc) (ticker: IWDA)

• Index: MSCI World Index
• TER: 0.20% p.a.
• Tracking difference: -0.08% p.a. (5-year average)
• Liquidity: High (average daily trading volume of €1.2 billion)
• Tax efficiency: High (Irish-domiciled, no dividend withholding tax)
• Performance: 14.28% p.a. (5-year annualized return in EUR)
• Risk: Medium (5-year annualized volatility of 14.16%)
• Dividend policy: Accumulating (reinvests dividends in the fund)

The iShares Core MSCI World UCITS ETF is one of the most popular and cheapest world ETFs available. It tracks the MSCI World Index, which covers over 1,600 large and mid-cap stocks from 23 developed countries. The index has a strong exposure to the US (66.5%), followed by Japan (7.8%) and the UK (4.4%). The index is also well diversified across sectors, with information technology (22.1%), financials (13.5%) and health care (12.4%) being the largest ones.

The ETF has a low TER of 0.20% p.a. and a low tracking difference of -0.08% p.a., meaning that it slightly outperforms the index. The ETF is also highly liquid, with an average daily trading volume of €1.2 billion. The ETF is domiciled in Ireland, which means that it does not suffer from dividend withholding tax, making it tax-efficient for most investors. The ETF is accumulating, meaning that it reinvests the dividends in the fund, which can boost the compound returns over time.

The ETF has delivered a strong performance of 14.28% p.a. over the past 5 years in EUR terms, beating the average of its peers. The ETF has also a medium risk level, with a 5-year annualized volatility of 14.16%, which is slightly lower than the index.

Xtrackers MSCI World UCITS ETF 1C (ticker: XDWD)

• Index: MSCI World Index
• TER: 0.19% p.a.
• Tracking difference: -0.10% p.a. (5-year average)
• Liquidity: Medium (average daily trading volume of €64 million)
• Tax efficiency: High (Irish-domiciled, no dividend withholding tax)
• Performance: 14.30% p.a. (5-year annualized return in EUR)
• Risk: Medium (5-year annualized volatility of 14.17%)
• Dividend policy: Accumulating (reinvests dividends in the fund)

The Xtrackers MSCI World UCITS ETF is another cheap and efficient world ETF that tracks the same index as the iShares ETF. It has a slightly lower TER of 0.19% p.a. and a slightly lower tracking difference of -0.10% p.a., meaning that it also slightly outperforms the index. The ETF is also domiciled in Ireland, which makes it tax-efficient for most investors. The ETF is accumulating, meaning that it reinvests the dividends in the fund.

The ETF has a slightly higher performance of 14.30% p.a. over the past 5 years in EUR terms, marginally beating the iShares ETF. The ETF has also a similar risk level, with a 5-year annualized volatility of 14.17%, which is slightly higher than the index.

The main difference between the Xtrackers ETF and the iShares ETF is the liquidity. The Xtrackers ETF has a much lower average daily trading volume of €64 million, which means that it may be harder to buy and sell the ETF without affecting its price. This may not be a problem for long-term investors, but it may be an issue for short-term traders or large investors.

Vanguard FTSE All-World UCITS ETF (USD) Accumulating (ticker: VWCE)

• Index: FTSE All-World Index
• TER: 0.22% p.a.
• Tracking difference: -0.07% p.a. (3-year average)
• Liquidity: Medium (average daily trading volume of €82 million)
• Tax efficiency: High (Irish-domiciled, no dividend withholding tax)
• Performance: 14.01% p.a. (3-year annualized return in EUR)
• Risk: Medium (3-year annualized volatility of 14.24%)
• Dividend policy: Accumulating (reinvests dividends in the fund)

The Vanguard FTSE All-World UCITS ETF is a newer and more comprehensive world ETF that tracks the FTSE All-World Index, which covers over 3,900 large, mid and small-cap stocks from both developed and emerging countries. The index has a similar exposure to the US (57.8%), followed by Japan (7.3%) and China (5.4%). The index is also well diversified across sectors, with information technology (20.9%), financials (15.8%) and consumer discretionary (12.6%) being the largest ones.

The ETF has a slightly higher TER of 0.22% p.a. and a slightly lower tracking difference of -0.07% p.a., meaning that it also slightly outperforms the index.

The ETF is also domiciled in Ireland, which makes it tax-efficient for most investors. The ETF is accumulating, meaning that it reinvests the dividends in the fund.

The ETF has a slightly lower performance of 14.01% p.a. over the past 3 years in EUR terms, slightly underperforming the iShares and Xtrackers ETFs. The ETF has also a similar risk level, with a 3-year annualized volatility of 14.24%, which is slightly higher than the index.

The main difference between the Vanguard ETF and the other ETFs is the coverage. The Vanguard ETF includes more stocks from more countries, especially from emerging markets, which may offer more diversification and growth potential. However, this also means that the ETF may be more exposed to political and economic risks, currency fluctuations and higher costs.

iShares MSCI ACWI UCITS ETF (Acc) (ticker: IUSQ)

• Index: MSCI ACWI Index
• TER: 0.20% p.a.
• Tracking difference: -0.09% p.a. (5-year average)
• Liquidity: Medium (average daily trading volume of €55 million)
• Tax efficiency: High (Irish-domiciled, no dividend withholding tax)
• Performance: 13.82% p.a. (5-year annualized return in EUR)
• Risk: Medium (5-year annualized volatility of 14.29%)
• Dividend policy: Accumulating (reinvests dividends in the fund)

The iShares MSCI ACWI UCITS ETF is another comprehensive world ETF that tracks the MSCI ACWI Index, which covers over 2,900 large and mid-cap stocks from both developed and emerging countries. The index has a similar exposure to the US (57.1%), followed by Japan (6.9%) and China (5.5%). The index is also well diversified across sectors, with information technology (21.4%), financials (15.1%) and consumer discretionary (12.7%) being the largest ones.

The ETF has the same TER as the iShares MSCI World ETF, 0.20% p.a., and a slightly lower tracking difference of -0.09% p.a., meaning that it also slightly outperforms the index. The ETF is also domiciled in Ireland, which makes it tax-efficient for most investors. The ETF is accumulating, meaning that it reinvests the dividends in the fund.

The ETF has a slightly lower performance of 13.82% p.a. over the past 5 years in EUR terms, slightly underperforming the other ETFs. The ETF has also a similar risk level, with a 5-year annualized volatility of 14.29%, which is slightly higher than the index.

The main difference between the iShares MSCI ACWI ETF and the other ETFs is the index provider. The iShares MSCI ACWI ETF follows the MSCI ACWI Index, which has a different methodology and composition than the FTSE All-World Index that the Vanguard ETF follows. For example, the MSCI ACWI Index includes South Korea as an emerging market, while the FTSE All-World Index includes it as a developed market. The MSCI ACWI Index also has a higher weight on information technology and a lower weight on health care than the FTSE All-World Index.

SPDR MSCI World UCITS ETF (ticker: SWRD)

• Index: MSCI World Index
• TER: 0.12% p.a.
• Tracking difference: -0.10% p.a. (3-year average)
• Liquidity: Low (average daily trading volume of €16 million)
• Tax efficiency: Low (Irish-domiciled, 15% dividend withholding tax)
• Performance: 14.18% p.a. (3-year annualized return in EUR)
• Risk: Medium (3-year annualized volatility of 14.16%)
• Dividend policy: Distributing (pays dividends quarterly)

The SPDR MSCI World UCITS ETF is the cheapest world ETF that tracks the same index as the iShares and Xtrackers ETFs, the MSCI World Index. It has a very low TER of 0.12% p.a. and a low tracking difference of -0.10% p.a., meaning that it also slightly outperforms the index. The ETF is also domiciled in Ireland, which makes it tax-efficient for some investors.

The ETF has a slightly lower performance of 14.18% p.a. over the past 3 years in EUR terms, slightly underperforming the iShares and Xtrackers ETFs. The ETF has also a similar risk level, with a 3-year annualized volatility of 14.16%, which is slightly lower than the index.

The main difference between the SPDR ETF and the other ETFs is the dividend policy. The SPDR ETF is distributing, meaning that it pays dividends quarterly to the investors. This may be preferable for some investors who want to receive regular income from their investments. However, this also means that the ETF suffers from a 15% dividend withholding tax, which reduces the net return for most investors. The ETF also has a lower liquidity, with an average daily trading volume of €16 million, which may make it harder to buy and sell the ETF without affecting its price.

Conclusion

In this article, we have discussed the 5 best world ETFs that you can consider investing in. We have compared their key features, such as the index they track, the costs, the distribution across regions and sectors, and the long-term return.

There is no single best world ETF that suits everyone. Each ETF has its own advantages and disadvantages, depending on your preferences, goals and tax situation. You should do your own research and analysis before investing in any ETF.

Here is a summary table of the 5 best world ETFs:

ETF	Index	TER	Tracking difference	Liquidity	Tax efficiency	Performance	Risk	Dividend policy
IWDA	MSCI World	0.20%	-0.08%	High	High	14.28%	Medium	Accumulating
XDWD	MSCI World	0.19%	-0.10%	Medium	High	14.30%	Medium	Accumulating
VWCE	FTSE All-World	0.22%	-0.07%	Medium	High	14.01%	Medium	Accumulating
IUSQ	MSCI ACWI	0.20%	-0.09%	Medium	High	13.82%	Medium	Accumulating
SWRD	MSCI World	0.12%	-0.10%	Low	Low	14.18%	Medium	Distributing

We hope that this article has helped you to find the best world ETF for you. If you have any questions or feedback, please let us know in the comments below. Happy investing! 😊

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