If you’re considering investing in global stock markets, Exchange-Traded Funds (ETFs) are a smart and budget-friendly option. They help you spread out your investments, giving you a safety net against risk. There are two big names in this space: the iShares Core MSCI World UCITS ETF (let’s call it IWDA) and the Vanguard FTSE All-World UCITS ETF (or VWRA for short). Wondering which one’s the best fit for your portfolio? You’re in the right place! We’ll compare IWDA vs VWRA and help you find the perfect partner for your financial journey.
Market Exposure
IWDA follows the MSCI World Index, made up of large and mid-sized companies from 23 developed countries. On the other hand, VWRA tracks the FTSE All-World Index. This index not only includes similar companies from developed countries, but also covers those from emerging markets.
By including emerging markets, VWRA gives investors a wider exposure to growth opportunities in these regions. However, keep in mind that these markets can be more unpredictable than developed ones. So, VWRA comes with a higher level of risk compared to IWDA.
To sum it up, if you want a more diverse mix of both developed and emerging markets, VWRA might be your go-to choice. But, if you lean towards a more cautious approach and want to focus on developed markets, IWDA could be a better fit for you.
Holdings and Sector Allocation
When weighing up these two ETFs, it’s essential to consider the number of holdings and the variety in sectors. IWDA holds around 1,600 stocks, while VWRA goes for a broader approach with about 3,400 stocks. This means that with VWRA, you’re spreading your investment across more companies, which might help lower your overall risk.
Let’s talk about sector allocations too. There are some differences between the two ETFs. IWDA tends to focus more on technology and healthcare stocks. On the flip side, VWRA emphasizes financials and consumer goods more. So, when you’re choosing between them, think about your personal investment preferences and which sectors you’d like to invest in.
Expense Ratios
When picking an ETF, it’s key to think about the expense ratio. This is the annual cost of managing the fund. Usually, a lower expense ratio means better returns for investors over time.
Now, let’s compare the expense ratios of IWDA and VWRA. IWDA has a 0.20% expense ratio, while VWRA’s is slightly higher at 0.22%. Although the difference is pretty small, IWDA comes out as the more cost-friendly option. This could potentially lead to better returns in the long run.
Dividend Reinvestment
When comparing IWDA and VWRA, don’t forget to consider their approach to dividends. Both ETFs are accumulating funds, which means they automatically reinvest dividends back into the fund. This gives you a hands-off approach to managing dividends.
There are some great benefits to this automatic reinvestment. First, it saves you time and effort since you don’t have to reinvest dividends manually. Plus, it helps maximize the power of compounding, as dividends are continuously reinvested and grow over time.
So, both IWDA and VWRA offer a convenient and wallet-friendly dividend reinvestment strategy through their accumulating structure. It’s one less thing to worry about as you build your investment portfolio.
Liquidity
Liquidity is important when investing in ETFs, as it affects how easily you can buy or sell shares. Luckily, both IWDA and VWRA have high daily trading volumes, which means strong liquidity. This can lead to lower bid-ask spreads, making trading more cost-effective when you’re buying or selling shares.
Now, IWDA typically has a higher trading volume compared to VWRA. But, both funds offer enough liquidity for most retail investors. So, in terms of liquidity, there isn’t a clear winner between IWDA and VWRA. The difference likely won’t significantly impact the overall investment experience for most people.
Past Performance
Keep in mind that past performance doesn’t guarantee future results. That said, looking at historical returns can give us some idea of how IWDA and VWRA have performed since they started.
IWDA has been around since 2009 and has achieved an annualized return of 9.5%. Meanwhile, VWRA, trading for about only three years, posted an annualized return of 5.5%. But, since it’s a shorter timeframe, we should be careful when looking at VWRA’s past performance. It may not be as reliable an indicator for future performance compared to IWDA’s longer track record.
To get a better sense of potential returns, we can also check out the historical performance of the indices these ETFs follow:
| ETFs | Tracked Index | YTD Returns (%) | 3-Year Average Annualized Returns (%) | 5-Year Average Annualized Returns (%) |
|---|---|---|---|---|
|
IWDA |
MSCI World Index |
9.82 |
13.64 |
8.69 |
|
VWRA |
FTSE All-World Index |
8.9 |
12.56 |
7.51 |
Conclusion: IWDA vs VWRA – Which One’s for You?
When deciding between IWDA and VWRA, it all comes down to your personal goals, how much risk you’re willing to take, and your preferences. Both ETFs give you wide access to global equity markets and have pretty low expense ratios, making them great options for long-term investors seeking variety.
If you’re keen on focusing on developed markets and want a slightly lower expense ratio, IWDA might be the one for you. But, if you’re all about broader global diversification, including emerging markets, and you’re okay with a bit more risk, then VWRA could be your perfect match.
