Globally focused Exchange Traded Funds (ETFs) provide an easy way to geographically diversify your portfolio. Last year, the global economy shrank sharply due to the impact of the COVID-19 pandemic. The International Monetary Fund (IMF) estimated in April that global production would decline by 3.3% in 2020. Global growth is expected to recover this year, but in part due to COVID-19 mutations and access to vaccines, individual economies will recover at very different rates. The IMF predicts that the global economy will grow by 6% in 2021 and 4.9% in 2022. Investors looking for exposure to global recovery should consider ETFs investing in companies in different countries.
- The global economy is expected to recover this year and 2022 after a pandemic contraction last year.
- The three ETFs for global investment are VWO, SPDW, and VXUS.
- The top holdings of these ETFs are the US-listed shares of Taiwan Semiconductor Manufacturing Co., Ltd., ASML Holding NV, and Alibaba Group Holding Co., Ltd., respectively.
Below is an overview of the three ETFs that provide geographical diversification to global-minded investors. These funds are relatively cheap and suitable for long-term buy-and-hold investments, but each ETF has a different approach. SPDW invests in developed countries, VWO focuses on emerging markets, VXUS holds both types of stakes, but leans towards developed markets with large companies. Over the past year, the MSCI All Country World Index, the global benchmark excluding the United States, has been below the US market. The index has provided a total return of 25.4% over the last 12 months, slightly above the 25.4% of the S & P 500 as of August 31, 2021. The best performing of the three ETFs listed below is the SPDR Portfolio Development Global Non-US ETF (SPDW), which is based on performance over the past year. All figures below are current as of September 1, 2021.
- 1 year performance: 19.9%
- Expense ratio: 0.10%
- Annual dividend yield: 2.06%
- Average daily dose for 3 months: 9,313,267
- Assets under management: $ 80.9 billion
- Start date: March 4, 2005
- Issuer: Vanguard
VWO is a large equity fund that tracks the FTSE Emerging Markets All Cap China A Inclusion Index. The index is market capitalization weighted and is made up of companies in emerging markets. VWO is one of the largest and most liquid ETFs in the world and is the cheapest and broadest emerging market fund to invest in countries such as China, Taiwan, Brazil and South Africa. Together with the following SPDWs, we offer a wide range of exposures to global securities while minimizing costs. The fund’s top holding companies include Taiwan Semiconductor Manufacturing Co., Ltd. (2330: TAI), a Taiwan-based semiconductor manufacturing and design company. Tencent Holdings Ltd. (700: HKG), a China-based internet services and technology holding company. Alibaba Group Holding Ltd. (9988: HKG), a provider of e-commerce, internet infrastructure, online finance, and internet content services.
- 1 year performance: 29.5%
- Expense ratio: 0.04%
- Annual dividend yield: 2.21%
- Average daily dose for 3 months: 1,670,553
- Assets under management: $ 11.9 billion
- Start date: April 20, 2007
- Publisher: State Street
SPDW is a large fund that tracks the S & P Developed Ex-US BMI Index, with an almost exclusive focus on developed countries outside the United States. This index is market capitalization weighted. Equities in finance, industry and information technology make up almost half of the combined ETF portfolio. SPDW is one of the cheapest global investment ETFs available. A similar priced fund is the BNY Mellon International Equity ETF (BKIE), but the latter is much newer and smaller, which can reduce liquidity. Top holdings of the fund include ASML Holding NV (ASML: AMS), a semiconductor company based in the Netherlands. Nestle SA (NESN: SWX), a Swiss food and beverage conglomerate. Sponsored the GDR of Samsung Electronics (SMSN: LON). A multinational electronics company based in South Korea.
- 1 year performance: 26.9%
- Expense ratio: 0.08%
- Annual dividend yield: 2.43%
- Average daily dose for 3 months: 2,569,235
- Assets under management: $ 50.6 billion
- Start date: January 26, 2011
- Issuer: Vanguard
VXUS covers the FTSE Global All Cap ex-US Index, which consists of shares issued by companies located outside the United States. This fund is the cheapest and widest range of funds that offers exposure to both emerging and developed markets. However, due to cap weighting, the fund has a small share of emerging markets and small cap stocks. VXUS has the potential to be an effective and inexpensive core holding for investors looking for broad international coverage through a single ETF. VXUS’s top holdings include US-listed shares of Alibaba Group Holding Ltd. (BABA). Tencent Holdings; and Taiwan Semiconductor Manufacturing.
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