Eric Dutram: Over the past few years, ETFs have gained in popularity among sector-focused investors and those looking to do short-term trades. Leveraged and niche ETFs have seen huge inflows as a result, leaving many of their broader ETF counterparts in the dust.
Yet as markets have become shakier—and more correlated– it could be worth it to take a more global approach to some portion of a portfolio. By doing this, and spreading risks around a host of nations and sectors, overall volatility can be lowered while still maintaining high levels of stock exposure (see more on ETFs at the Zacks ETF Center).
Furthermore, from a long-term perspective, an allocation to a global ETF could be a very cost effective way to achieve access to a variety of nations, both emerging and developed, and their respective markets. By using this strategy and dollar cost averaging, investors can make a broad bet on global growth without having to worry about sector or national specifics.
For these more hands-off investors, or those looking to make the broadest play possible, we have highlighted five of these global ETFs below. These funds look to cheaply and easily provide investors with complete exposure to equity markets around the world, irrespective of sectors. While they all have a similar focus, there are several key differences that investors need to be aware of before considering making a purchase in any of these ‘one-stop shop’ ETFs:
iShares MSCI ACWI Index Fund (NYSEARCA:ACWI)
This global ETF tracks the MSCI ACWI Index, a benchmark for global stock performance that looks to capture at least 85% of the total market capitalization in the world. With this focus, the fund holds over 1,200 securities in its basket, charging investors 34 basis points a year in fees (read Three Overlooked Emerging Market ETFs).
In terms of sector exposure, the fund is tilted towards financials (16%), and technology (13%), while energy and cyclical consumer make up 11% each of the product as well. Country allocations are heavily tilted towards the U.S.—47% of the total—while a host of developed markets round out the rest of the top seven nations, although developing countries do receive some allocation as well.
The product is extremely popular among all stripes of investors as it has over $2.6 billion in AUM despite being just a little over four years old. The global ETF also has an impressive daily volume of over 700,000 shares while the annual yield—at 2.2%– is nothing to sneeze at either.
Vanguard Total World Stock ETF (NYSEARCA:VT)
Vanguard’s entrant in the space is VT, a global ETF that follows the FTSE Global All Cap Index. This benchmark provides investors with exposure across a variety of markets, holding nearly 750 securities in total and charging a rock-bottom 22 basis points in fees per year (see Ten Biggest U.S. Equity Market ETFs).
Financials are also the top sector in this fund followed by tech, although industrials, energy, and consumer discretionary firms each tie with about 11% each to round out the top five. Country holdings are also comparable, as the U.S. dominates at nearly half of the total although European stocks account for one-fourth of assets and the Asia-Pacific region comprises another 20% of exposure.
This global ETF has also been a hit with investors having amassed over $1.2 billion in AUM. Volume is also high in the ETF, coming in close to 200,000 shares per day, an amount that produces tight bid ask spreads. In addition to this, the product pays a solid 2.2% yield much like its counterparts in the space.
iShares MSCI World Index Fund (NYSEARCA:URTH)
Tracking the MSCI World Index, URTH is a new choice for investors looking to exposure their portfolio across a number of markets. However, the ETF has a focus on developed nations, allocating towards two dozen countries across North America, Europe, Asia, and the Pacific Rim.
The fund is another low cost choice in the space although it comes in slightly higher than VT at 24 basis points a year. However, it is worth noting that URTH holds close to 1,400 securities in its basket, close to double what VT has in its holdings profile (readETF Investors: Beware The Coming ETN Backlash).
The fund has a similar focus as others on the list from a sector perspective, giving financials, tech, and industrials the top three spots. In terms of regions, North America accounts for nearly 60% of assets although Europe does make up about 28% as well.
Possibly due to the newness of the fund, this ETF still has light trading volume and a low AUM. Volume is still below 1,000 shares a day while assets are below $25 million. This suggests that bid ask spreads will be quite loose for this product, at least initially. Fortunately for the fund, its 30 Day SEC yield is quite robust, coming at 2.5%, putting it among the highest in the competitive space.
SPDR MSCI ACWI IMI Fund (NYSEARCA:ACIM)
This product looks to be a new competitor to ACWI having debuted at the end of February and tracking the MSCI ACWI IMI Index. However, this global ETF holds about 740 securities in its basket—far less than ACWI—although its expense ratio is quite cheap, coming in at 25 basis points per year.
Unsurprisingly, the fund has a similar sector breakdown to its iShares counterpart, although the sector exposure is slightly different. In this fund, financials take the top spot at 16% and are then followed by a 12% allocation to both industrials and technology and then 11% in energy stocks. Large caps also comprise the bulk of the global ETF, accounting for nearly 85% of total assets.
In terms of national holdings, the U.S. accounts for about 47% of the total, while a number of other developed nations round out the top seven. Currency exposure follows a similar breakdown, although American dollars receive a slightly bigger allocation than one might expect due to ADRs (see Three Great ETFs For Your IRA).
While ACIM might be one of the cheaper products in the global ETF category, the fund has had trouble accumulating assets. AUM is below five million dollars while daily volume has trouble getting through the 1,000 share per day mark. However, the product has only been around for a very short time so one should give it a chance before writing it off for the long term.
Accuvest Global Opportunities ETF (NYSEARCA:ACCU)
For investors seeking a more active approach to global ETF investing, ACCU could be an interesting choice. The product is structured as a fund-of-funds and holds other ETFs in its basket in order to give investors global exposure. However, this technique, along with active management, produces a rather high expense ratio coming in at 1.78%.
With that being said, it could be a quality pick for investors who want to tap into Accuvest’s multi-factor country ranking model. This approach looks to identify countries whose markets may outperform other equity markets on the world stage based on 40 different factors with a top-down method.
Currently, this produces a fund that has weights to many emerging market nations. In fact, the exposure to the iShares S&P 500 ETF (NYSEARCA:IVV) is the only developed market in the product as of right now, rounded out by holdings in Thailand, South Korea, Brazil, South Africa, and China (see Frontier Market ETF Investing 101).
While this may be too heavy of an emerging market focus for some, it is important to remember that the rankings can and do change and that this list of nations will likely be different a year from now.
Furthermore, the product has performed quite admirably when compared to its counterparts on this list, especially over the past month as markets have become shakier. Given this solid performance, some investors who like active management principles could be well served by looking at this global ETF from AdvisorShares for their total market exposure.
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