The Best Global Equity ETFs (2023) (2024)

Key Points:

• Global Equity ETFs offer ultimate diversification, encompassing thousands of shares from across the globe.
• Accumulating versions automatically reinvest dividends for you. Distributing ETFs pay you the dividends.
• Vanguard (VWRP and VWRL) and iShares (SSAC and IWRD) are the big names, and there is very little to choose between the two.

If there is a standard bearer for the ease of stock diversification with ETFs, the Global Equity ETF is it. Investing doesn’t have to involve stock picking! These funds hold thousands of shares from all over the world, and are weighted towards the big names in the bigger markets that generate the most global wealth.

By allowing you to capture the returns of the world’s stock markets, you can spread out your investments with a single purchase. Investors, both individual and professional, are particularly prone to home bias, focussing too heavily on their own country’s market. This is mostly to the detriment of their returns.

VWRP vs VWRL? SSAC vs IWRD?

Confused? It’s not always easy differentiate between the various versions of the same product. Here is a cheat-sheet which will help you make a decision, based on whether you want to receive the dividends (distributing) or have the dividends reinvested in the fund (accumulating).

* IWRD only includes developed countries, so it is often paired with an emerging market ETF. VWRL contains both developed and emerging markets, so it’s the simplest option for a distributing ETF with a truly global diversification.

Benchmarks: Vanguard FTSE All-World Index vs iShares MSCI World vs iShares MSCI ACWI Index

There are a variety of options in this space, with some ETFs focussing on just developed economies and some on emerging markets. The biggest players by far are Vanguard and iShares (Blackrock).

What is the fundamental difference between the options? Aside from whether they are accumulating or distributing (see below), Vanguard and iShares try to match the performance of different benchmarks. Vanguard uses the FTSE All-World Index, whilst iShares measures against MSCI varieties.

Most of the funds I look at here have a mix of stocks from both developed and emerging markets. The exception is IWRD which only covers developed nations and tracks the MSCI World Index. SSAC, which tracks the MSCI ACWI index includes emerging markets.

They are all market cap weighted, which means the bigger companies from developed nations make up a larger portion of the holdings.

Vanguard VWRL vs VWRP

So what is the difference between the Vanguard ETFs? VWRL is a distributing ETF, so it pays investors a quarterly dividend just like a dividend paying stock. This is made up of the dividends paid by the companies that are included in the ETF. At time of writing the yield was 2.05%. VWRP, on the other hand, automatically reinvests this money back into the fund. It is an accumulating ETF. Otherwise the two ETFs are identical.

See our review of the Vanguard FTSE All World UCITS ETF for a more detailed comparison between these ETFs.

VWRL vs VHYL

VHYL is also a distributing ETF, only the companies that make up the fund tend to pay larger dividends. It is still a passive fund, and tracks the FTSE All-World High Dividend Yield Index.

VHYL is more expensive than VWRL, with an annual ongoing charge of 0.29%. For that you receive a higher dividend yield: at the time of writing it stands at 3.73%.

It is worth noting that although the dividend yield is slightly higher, the performance of VHYL over the last 5 years has been significantly poorer than that of VWRL, returning 18.91% vs VWRL’s 30.43%. On this basis there are better options for generating investment income.

Remember, dividends aren’t “free money” – when they are paid the value of the shares in question decline by the amount paid out. Choosing whether or not to receive a dividend is almost always a tax-based decision. You may find it more tax efficient to avoid dividends and instead pay yourself an income through the sale of shares.

Let’s have a detailed look at the two accumulating ETFs to see how they differ.

Blackrock (iShares) and Vanguard have a huge share of the index ETF market, and if you are looking for a large, liquid, low-cost globally diverse fund, these two are at the top of the list.

As you can see from the table above, there is very little to choose between them. Their performance has been in lockstep since the creation of VWRP in 2019, despite tracking different indexes. This is unsurprising when you look at where they invest the most money, with their top regional and sector investments almost identical. Their top stock holdings are likewise very similar, both currently dominated by the big names in technology.

VWRP is better diversified, with more than double the number of holdings than SSAC. Most ETFs use a strategy known an sampling to match the index they are tracking. Rather than purchasing every stock on the index, they invest in a representative sample that they judge to be sufficient to match the index returns.

In any case, as you can see from their respective 3-year Beta at the bottom of the table, both ETFs match their index almost perfectly.

Performance

To give you some idea of longer term returns, we can look at SSAC which was created in 2011. Since then it has achieved an annualised return of 8.96%, whilst it’s underlying index, the MSCI ACWI, has seen a return of 8.40% since 1987. By way of comparison, the younger FTSE All-World Index has an average annualised return of 8.72% since 2005.

Conclusion

For an accumulating global equity ETF, there is little to choose between the VWRP and SSAC. The iShares ETF is slightly cheaper, but the Vanguard is more diversified. Really, either ETF is a great choice for an global equity ETF covering developed and emerging markets.

The choice may come down to what is offered by your ETF provider. Most generic platforms will carry both options, but if for instance you have an account with Vanguard, then VWRP is the way to go.

Given its performance lag, VHYL is probably best avoided. These ETFs aren’t built for income generation, so if you would like to draw a dividend there are more efficient strategies to do so.

Further reading:

These resources are definitely worth a look. They should address any further questions you have about the performance, holdings, sustainability and objectives of the respective funds.

If you’re ready to look at the options for the bond side of a global two-ETF portfolio, see The Best Global Bond ETFs.

Remember that past performance is not indicative of future results. The value of investments can rise and fall, and investors can get back less than they put in. Nothing on this website constitutes financial advice.