The big world ETF guide
Reading time: approx. 12 min
1) INTRODUCTION
Anyone entering the world of investing and wanting to start investing often wants one thing above all else: Simplicity.
A globally diversified ETF offers just that: an uncomplicated way to participate in global economic growth at low cost without having to familiarize yourself with complex investment strategies. But when it comes to choosing the right global ETF, many beginners are faced with the question: Which is the right one for me? me?
In this article, I will introduce you to various options for building a diversified world ETF portfolio. We start in the first section with the "one ETF for everything" solution, which is particularly suitable for investors who prefer not to deal with the topic at all. These one-ETF solutions can be saved like a piggy bank and are probably the most passive form of investment.
For investors who find the single-ETF solution too boring or under-complex, we turn to so-called multi-ETF solutions - i.e. investment ideas that include several ETFs. In the final section, we will take a closer look at a special variant that can be considered complex and requires more activity.
If you are a beginner, you can safely stop reading after the first section on the one-ETF solution, as this section contains all the information you need for a simple but effective investment in ETFs. The interested and advanced reader will then get their money's worth in the last section.
2.) THE ONE-ETF SOLUTION
Let's start with the simplest of all conceivable options: one ETF for everything. But even with the simplest form of building a world portfolio, it's the small but fine details that count. Each variant includes specific ETF suggestions with which you can realize such a one-ETF solution.
2.1 MSCI World
Probably the best-known world index is the MSCI World Index. This focuses on the largest companies in the so-called developed markets. The index contains the 1500 largest companies from 23 industrialized countries and comprises around 85% of the market capitalization of the world's industrialized nations [1]. The USA has by far the highest weighting, accounting for around 70% of the entire MSCI World Index. The second-highest weighted country is Japan with around 6%, followed by the UK with around 4%. German equities account for just over 2% of the index. The largest 10 positions - with illustrious names such as Microsoft $MSFT (-1,88%) Apple $AAPL (-4,39%) or Nvidia $NVDA (-2,53%) - already make up 24% of the overall index.
The easiest way to invest in the MSCI World Index is via an ETF. The most cost-effective option is the Amundi $MWRD or SPDR $SPPW (-0,37%) which only incur annual costs (TER) of 0.12% [2]. These are accumulating ETFs that do not distribute the income from the individual shares but reinvest it at fund level. If you prefer regular distributions, you can also choose a distributing ETF such as $MWOE (-1,44%) or $HMWO (-2,26%) you can also choose a distributing ETF.
2.2 FTSE All World
Another classic in the field of world indices is the FTSE All World. In addition to the industrialized countries, it also includes so-called emerging markets (emerging markets). The index includes the 4000 largest companies from around 50 countries [1]. In addition to the industrialized nations, the index therefore also includes shares from China, India, Brazil and Taiwan, for example. The total weighting of the USA in the FTSE All World is around 60% and the 10 largest positions account for around 21%. About 90-95% of global market capitalization is covered by the FTSE All World.
The biggest difference to the MSCI World Index is that the FTSE All World also includes emerging markets and is therefore even more broadly diversified worldwide. According to [3], the cheapest accumulating ETF on the FTS All World Index with an expense ratio of 0.15% is the one from Invesco $FWRG (-3,08%) . However, the FTSE All World ETF from Vanguard $VWCE (-2,57%) enjoys enormous popularity here on Getquin (@Lorena). Distributing variants would be the $FTWG (-2,34%) from Invesco or the $VWRL (-1,65%) from Vanguard.
2.3. MSCI ACWI IMI
Probably the most broadly diversified index is the MSCI ACWI IMI. The somewhat unwieldy name stands for MSCI All Country World Index (ACWI) Investable Markets Index (IMI). This comprises over 9000 shares from industrialized and emerging countries.
The biggest difference to the FTSE All World apart from the fact that the number of shares in the index is more than twice as high, is that the MSCI ACWI IMI also includes small caps and thus achieves an even broader diversification. According to MSCI, the index covers approx. 99% of global market capitalization.
With an expense ratio of only 0.17% and at the same time the only accumulating ETF on the MSCI ACWI IMI is the $SPYI (-2,85%) from SPDR. The distributing variant has also been available since June 2024 $SPSA (-2,4%).
In my opinion, the MSCI ACWI IMI the all-in-one package when it comes to broadly diversified global investing. I therefore personally use the $SPYI (-2,85%) and the $SPSA (-2,4%) for my child's custody account.
The following chart provides an overview to illustrate this:
