Exchange-traded funds (ETFs) have emerged as an efficient way to build a balanced and globally diversified portfolio, providing broad exposure to multiple global equity markets. By spreading investments across various regions and sectors, investors can mitigate risks tied to any single market or economy and capitalize on the growth potential of emerging markets.
Amid this backdrop, three ETFs such as Vanguard Total World Stock ETF (VT), iShares MSCI ACWI ETF (ACWI), and Vanguard FTSE All-World ex-US Index Fund (VEU) are well-suited for investors seeking a balanced global portfolio.
In an interconnected global economy, the importance of diversifying investments beyond domestic borders cannot be overstated. As economies worldwide grow at different rates and are subject to unique risks, investors who limit their portfolios to a single country or region may miss out on valuable growth opportunities and expose themselves to unnecessary risks.
Global diversification helps mitigate the impact of regional downturns and allows investors to benefit from positive economic trends worldwide. One of the most effective and accessible ways to build a diversified global portfolio is through ETFs. They offer investors broad exposure to international markets, encompassing diverse industries and geographic regions.
Let’s discuss the fundamentals of three ETFs, including VT, ACWI, and VEU, which can help investors achieve global diversification and capitalize on the growth potential of different developed and emerging markets.
Vanguard Total World Stock ETF (VT)
VT provides exposure to global equity markets, including the U.S., ex-U.S. developed markets, and emerging economies. This ETF is dominated by large-cap stocks and maintains minimal exposure to small-cap companies. VT scores well in terms of diversification and high potential for growth.
VT tracks the performance of the FTSE Global All Cap Index. The ETF has assets under management (AUM) of $37.89 billion. The fund has a total of 9762 holdings. Its top holdings include Microsoft Corporation (MSFT) with a 3.95% weighting, Apple Inc. (AAPL) at 3.63%, followed by NVIDIA Corporation (NVDA) with a 3.49% weighting.
The fund has an expense ratio of 0.07%, lower than the category average of 0.37%. Over the past three months, VT fund outflows came in at $1.02 billion and $1.67 billion over the past six months. Also, the ETF has a beta of 0.94.
VT pays an annual dividend of $2.21, which yields 1.95% on prevailing prices. Its dividend payments have grown at an 8.8% CAGR over the past three years. Moreover, the fund has a record of paying dividends for 13 consecutive years.
The ETF has gained 8% over the past six months and 19.1% over the past year to close the last trading session at $114.72. It has a NAV of $114.67 as of August 15, 2024.
VT’s POWR Ratings reflect this promising outlook. The ETF has an overall B rating, translating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
VT has an A grade for Buy & Hold and a B for Trade. Of the 133 ETFs in the B-rated Global Equities ETFs group, it is ranked #23.
To access VT’s POWR Ratings for Peer, click here.
iShares MSCI ACWI ETF (ACWI)
ACWI provides exposure to thousands of countries across different developed and emerging economies, giving it appeal to investors looking to simplify the portfolio construction process and minimize rebalancing needs. The fund is used to diversify internationally and seek long-term growth in the portfolio.
ACWI tracks the performance of the MSCI AC World Index. With $17.92 billion in AUM, the fund’s top holdings include Apple Inc. (AAPL) with a 4.40% weighting, followed by Microsoft Corporation (MSFT) at 3.97%, and NVIDIA Corporation (NVDA) and Amazon.com, Inc. (AMZN) at 3.94% and 2.16%, respectively.
The ETF currently has 2353 holdings in total. Over the past three months, ACWI’s fund outflows were $843.85 million. In addition, its expense ratio of 0.32% compares to the 0.37% category average. The ETF’s NAV was $114.32 as of August 15, 2024.
ACWI pays a $1.90 per share dividend annually, which translates to a 1.69% yield on the current price. Its dividend payments have grown at a CAGR of 10.4% over the past three years. Additionally, the ETF has a record of paying dividends for 15 consecutive years.
The fund has gained 7.7% over the past six months and 20% over the past year to close the last trading session at $114.40. Also, ACWI surged 12.4% year-to-date. It has a beta of 0.93.
ACWI’s fundamental strength is reflected in its POWR Ratings. The ETF’s overall B rating equates to a Buy in our proprietary rating system. It has an A grade for Buy & Hold and a B for Peer and Trade. The fund is ranked #24 out of 133 ETFs in the B-rated Global Equities ETFs group.
Click here to access all ACWI ratings.
Vanguard FTSE All-World ex-US Index Fund (VEU)
VEU offers broad-based exposure to equity markets outside the U.S., including developed and emerging markets. VEU is known for its cost efficiency and depth of holdings and does an excellent job of balancing exposure across several ex-U.S. economies. This ETF can be an ideal tool for investors constructing long-term portfolios.
The ETF tracks the performance of the FTSE All-World ex-US Index. VEU has an AUM of $38.34 billion. The fund has a total of 3811 holdings. Its top holdings include Taiwan Semiconductor Manufacturing Co., Ltd. (TSM) with a 2.49% weighting, U.S. Dollar at 1.70%, and Novo Nordisk A/S Class B (NOVO.B) and ASML Holding NV (ASML) at 1.54% and 1.41%, respectively.
VEU has an expense ratio of 0.07%, lower than the category average of 0.40%. VEU fund outflows were $136.04 million over the past year. Also, it has a beta of 0.82.
The ETF pays an annual dividend of $1.82, which yields 3.07% on prevailing prices. VEU’s dividend payments have grown at a 7.4% CAGR over the past three years. Moreover, the fund has a record of paying dividends for 14 consecutive years.
The fund has gained 6.5% over the past nine months and 11.6% over the past year to close the last trading session at $59.93. The fund has a NAV of $59.93 as of August 15, 2024.
VEU’s POWR Ratings reflect this strong outlook. The ETF has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
VEU has an A grade for Buy & Hold and a B for Peer and Trade. Of the 75 ETFs in the B-rated Foreign Large Cap Blend ETFs group, VEU is ranked #2.
To access all the POWR Ratings for VEU, click here.
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VT shares were trading at $114.94 per share on Friday morning, up $0.22 (+0.19%). Year-to-date, VT has gained 12.73%, versus a 17.14% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions. More…