What's the best world market tracker? (For a Newbie)

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Ruben86

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Hi All,

I'm a newbie investor. I'm scouring the markets at the moment looking for good individual equity investments but I'm not confident enough in picking individual stocks yet and I want something that will just track the markets in general. I've heard iShares MSCI World ETF (NDDUWI) or The MSCI All Country World Index (ACWI) are the ones to go for. Any more seasoned investors here have any thoughts on that you could share? Not looking to reinvent the wheel here, just want to track the global markets.

Any feedback is much appreciated.
 
I assume you are already aware of the unfortunate ETF tax situation.

The MSCI World Index contains stocks of large companies located in developed countries, while the MSCI All Country World Index also contains stocks of large companies in some other countries. The latter is similar to the FTSE All-World index, for which there is a popular Vanguard ETF.

There are several low cost ETFs that track them. If the tax situation were better, they would be my top choice. US-focused indices have done better in recent (and not so recent) years, but it seems safer (over the long term, although potentially more volatile in the short term due to emerging market exposure) to me to get exposure to a greater diversity of countries. For this greater diversity, I would personally go with ACWI (or the similar FTSE index I mentioned) over the World Index.
 
Ruben86 said:
Hi All,

I'm a newbie investor. I'm scouring the markets at the moment looking for good individual equity investments but I'm not confident enough in picking individual stocks yet and I want something that will just track the markets in general. I've heard iShares MSCI World ETF (NDDUWI) or The MSCI All Country World Index (ACWI) are the ones to go for. Any more seasoned investors here have any thoughts on that you could share? Not looking to reinvent the wheel here, just want to track the global markets.

Any feedback is much appreciated.
Click to expand...
MSCI are the company who create the index. They then sell this to companies such as iShares, Vanguard, State Street etc. These fund managers then have to try to mirror the returns as perfectly as they can taking all the inflows and outflows into account. The bit they are off by is called the tracking error. The smaller the tracking error, the better.

The World index is only developed world. The All country includes emerging markets, so they are different funds. Emerging markets have lagged behind in recent years so the World index has outperformed the all country. That is not to say that will continue. The S&P500 is another index tracking 500 US companies.

It is not as simple as just buying an index. there are tens of thousands of indexes.


Steven
www.bluewaterfp.ie



www.bluewaterfp.ie

Tracking Error - Bluewater Financial Planning

Passive Funds and ETFs are hugely more popular these days than in the past. People believe that markets in efficient and that news about a company is quickly reflected in its share price, whether the news is good or bad. When investing in a passive fund, although the fund manager doesn’t have to...
www.bluewaterfp.ie www.bluewaterfp.ie
 
Thanks for taking the time to respond everyone. I think I'll go with the All Country Index. I don't plan on doing anything other than letting it sit there for the next 20 years so surely you can't go wrong with a spread like that. Of course, I know you can, but I think the odds are in my favor over a 20+ year span.

Regarding the tax situation, thanks for the heads up. I'm aware of all the implications on that front.
 
Hi Everyone,

I am looking at purchasing the ishares ACWI or the vanguard FTSE All world.
When i look at the proportion of countries, US is around 60% which is very weighted to their market.
If the US stock market crashed due to some unforeseen event, would this stock index reinvest in stocks outside the US to rebalance? Is this how it works?

Can someone point me to world stock index which is not dominated by US?
I understand This index might be lower risk /lower return than the above mentioned indexes.

Thanks,
Silvergrove
 
Thank you RedOnion for reply. My understanding is that S&P500 is 80% of US capitalisation.
So i could guesstimate that the world indexes are around 50% weighted to S&P500 stocks.
So, some diversificaton from S&P500 but not a massive one.
It should follow quite closely any big jumps or dips in the S&P500 i would think.

Thanks
Silvergrove
 
You don't need to guess, you can check it on Yahoo finance.
For a newbie investor, your initial instinct is correct, just buy a world index fund.
Don't spend too much time worrying about the differences between indexes, you can't know in advance which index will do better and anyway the differences will be very small.

The Best All World ETF's that are commission free on Degiro

  • HSBC MSCI World ETF (Distributing), IE00B4X9L533, TER 0.15%, Euronext Paris
  • iShares Core MSCI World ETF (Accumulating), IE00B4L5Y983, TER 0.2%, Euronext Amsterdam
  • Vanguard FTSE All-World ETF (Distributing), IE00B3RBWM25, TER 0.22%, Euronext Amsterdam
  • Vanguard FTSE All-World ETF (Accumulating), IE00BK5BQT80, TER 0.22%, Euronext Amsterdam

These are free to trade on Degiro, but don't search using the name. Instead search using the IE code, this will get you the exact one that's free to trade.

Assuming you are in the top tax bracket I would choose the last one.
 
AJAM said:
You don't need to guess, you can check it on Yahoo finance.
For a newbie investor, your initial instinct is correct, just buy a world index fund.
Don't spend too much time worrying about the differences between indexes, you can't know in advance which index will do better and anyway the differences will be very small.

The Best All World ETF's that are commission free on Degiro

  • HSBC MSCI World ETF (Distributing), IE00B4X9L533, TER 0.15%, Euronext Paris
  • iShares Core MSCI World ETF (Accumulating), IE00B4L5Y983, TER 0.2%, Euronext Amsterdam
  • Vanguard FTSE All-World ETF (Distributing), IE00B3RBWM25, TER 0.22%, Euronext Amsterdam
  • Vanguard FTSE All-World ETF (Accumulating), IE00BK5BQT80, TER 0.22%, Euronext Amsterdam

These are free to trade on Degiro, but don't search using the name. Instead search using the IE code, this will get you the exact one that's free to trade.

Assuming you are in the top tax bracket I would choose the last one.
Click to expand...
The difference between distributing and accumulating is what happens to the dividends.

Accumulating they stay within the ETF and are reinvested.

For distributing, dividends are paid out and you will have to pay income tax on this (PAYE, PRSI and USC).
 
Fortune said:
The difference between distributing and accumulating is what happens to the dividends.

Accumulating they stay within the ETF and are reinvested.

For distributing, dividends are paid out and you will have to pay income tax on this (PAYE, PRSI and USC).
Click to expand...
These are all UCITs domiciled in Ireland.

You don’t pay income tax on these funds they are all subject to exit tax at a flat rate of 41% and taxable every 8 years even if you don’t sell.
 
Marc said:
These are all UCITs domiciled in Ireland.

You don’t pay income tax on these funds they are all subject to exit tax at a flat rate of 41% and taxable every 8 years even if you don’t sell.
Click to expand...
D'oh, got caught daydreaming about the olden days
 
AJAM said:
The Best All World ETF's that are commission free on Degiro

  • HSBC MSCI World ETF (Distributing), IE00B4X9L533, TER 0.15%, Euronext Paris
  • iShares Core MSCI World ETF (Accumulating), IE00B4L5Y983, TER 0.2%, Euronext Amsterdam
  • Vanguard FTSE All-World ETF (Distributing), IE00B3RBWM25, TER 0.22%, Euronext Amsterdam
  • Vanguard FTSE All-World ETF (Accumulating), IE00BK5BQT80, TER 0.22%, Euronext Amsterdam
Click to expand...

As said by previous posters MSCI World is not an all world index, it's only developed countries.

MSCI ACWI is the equivalent all world index.
 
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If these are bought as part of a pension (Davies select) are they free of the 8 year deemed disposal? ie taxed as income tax in retirement. (Tax reduced in retirement as lower income, probably 20% income tax instead of 40% (plus USC PRSI)). I am assuming this is the case, just double checking before asserting this to my wife.
 
what is the cheapest way to invest in the msci using a company that looks after the taxes etc?
 
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