Global exchange-traded funds (ETFs) can make it easier to invest in companies worldwide through one investment. When comparing ETFs, consider the index or strategy, markets and sectors covered, and how they fit your investment goals.
Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.
A a glance
01.
Compare the investment strategy, types of companies included, and resulting market coverage before comparing costs.
02.
Understand the difference between ‘world’ ETFs, which cover developed markets, and ‘all-world’ ETFs, which also include emerging markets.
03.
Consider the different risks of developed and emerging markets and the level of exposure that fits your goals.
04.
Look beyond fees and ETF count: overlapping ETFs can concentrate your portfolio, meaning more of your money is exposed to the same companies or markets.
What should you compare before choosing a global ETF?
When comparing global ETFs, start with the investment approach – do they track a market index or does a professional portfolio manager actively choose the stocks?
An index is a group of investments representing a market and determines which markets and companies an ETF aims to include.
The goal isn’t to find an ETF that is best in every category. It’s to choose one whose market coverage, construction and costs fit the role you want it to play in your portfolio.
This also avoids comparing ETFs designed to do different jobs. For example, a developed-markets ETF and an all-world ETF may both offer broad international exposure but include different markets.
One important difference is emerging market exposure. When it comes to index-tracking global ETFs, some invest only in developed markets, while others can include both developed and emerging markets. Check the underlying index to understand which markets are included and in what proportions.
The goal isn’t to find the ‘best’ ETF in every category. It’s to choose one that offers the right mix of market coverage, investment approach, and cost for your goals and the level of risk you’re comfortable with.
This also avoids comparing investments that are designed to do different jobs. A ’world’ ETF and an ‘all-world’ ETF may both be described as global, but they don’t provide identical exposure.
For example, the iShares Core MSCI World UCITS ETF (IWDA) and iShares FTSE All World UCITS ETF (FTAW) both invest across global stock markets, but they track different indices and cover different markets. Understanding what each index includes can help you compare ETFs before looking at fees or recent performance.
How do world, all-world and emerging-markets ETFs differ?
The main difference is which countries they include. Some global ETFs cover developed markets only, some emerging markets only, while others combine developed and emerging markets in one investment.
The labels provide a useful starting point, but they aren’t always used consistently. Investors should check the ETF’s underlying index to understand its actual coverage.
Three iShares ETFs help show how this distinction works in practice.
iShares Core MSCI World UCITS ETF
Tracks the MSCI World Index, holding around 1,350–1,400 large- and mid-cap stocks across 23 developed markets. It does not include emerging markets.
iShares FTSE All World UCITS ETF
Tracks the FTSE All-World Index, holding around 4,200–4,300 large- and mid-cap stocks across nearly 50 developed and emerging markets.*
iShares MSCI Emerging Markets UCITS ETF
Tracks the MSCI Emerging Markets Index, holding around 1,200–1,300 large and mid-sized stocks across more than 20 emerging markets.*
Why choose an all world ETF instead of world + emerging markets?
There are different ways to combine developed and emerging markets. Developed markets include countries such as the UK, US and Japan, while emerging markets can include China, India and Brazil.
An all-world ETF includes both developed and emerging markets within a single investment, with the proportion of each determined by the index it tracks. This approach may be best suited for those investors who prefer the simplicity of accessing a diversified portfolio of stocks in one trade and are comfortable with a given exposure to emerging market risk.
Conversely, a developed markets world ETF can be combined in a portfolio with a separate emerging markets ETF. This allows investors to decide what proportion of their portfolio to allocate to emerging markets.
Using a developed markets world ETF gives investors more control over the potential proportion of emerging markets to allocate to via a separate ETF and managing the allocation over time. Neither approach is inherently better, and there’s no single approach that suits every investor.
What costs should you compare?
Once you have found ETFs with the investment approach and market coverage you are looking for, compare their costs. You don’t need to give every cost equal weight: start with the ETF’s ongoing fund charge and the fees charged by your investment platform, then consider trading costs such as dealing fees and the bid–ask spread. The costs that matter most will partly depend on how and how often you invest.
Keeping costs down can help more of any investment return remain in your portfolio, but cost should not be considered in isolation. A lower-cost ETF isn’t necessarily the better choice if it doesn’t provide the market coverage or investment approach you’re looking for. Investment returns aren’t guaranteed, and the value of investments can fall as well as rise.
Review the ETF’s prospectus and other fund documents for full details on its investment approach, risks, income treatment, and costs.
01.
Ongoing charge (TER)
The annual cost deducted within the ETF to cover its operation.
02.
Platform or broker fee
The amount charged by the investment platform/broker for holding or administering investments.
03.
Dealing/trading fee
A charge that may apply when buying or selling the ETF.
04.
Bid ask spread
The gap between an ETF's buying and selling price. A narrower spread generally means lower trading costs.
05.
Currency conversion cost
A charge that may apply when a platform converts money between currencies for a trade.
06.
Tracking difference
A measure of the gap between the ETF's return and the return of the index it follows.
07.
Tracking error
A measure of how consistently the fund matched the index over time based on how much the tracking difference fluctuates over time.
How can you check for portfolio overlap?
Portfolio overlap (or concentration) occurs when multiple investments, such as ETFs, hold many of the same underlying companies. As a result, adding more ETFs can make a portfolio appear more diversified, while actually providing little additional exposure to different companies, sectors or markets.
The simplest way to check is to compare the underlying indices and the ETFs largest holdings, country weights and sector weights. It is also worth asking what the second ETF adds that is not already present in the first. Your trading platform may also provide you with a view of the breakdown of country and sector weights of your whole portfolio.
Overlap is not automatically a problem. An investor may deliberately want more exposure to a country, sector or type of company.
The important point is to recognise that this is a concentration decision, not additional diversification.
A useful test is whether each ETF has a clear and different role. When two holdings serve the same purpose and own much of the same market, the extra complexity may not be adding much value.
How can global ETFs work together in a portfolio?
Build your portfolio around what each ETF invests in, rather than how many ETFs you own.
One broad global ETF may already provide exposure to companies around the world. Any additional ETFs should have a clear purpose, such as adding a market that isn’t covered or increasing your exposure to a particular region or sector.
Think of this as a diversified core (the global ETF) with carefully chosen additions (targeting particular countries, sectors or themes). Before adding an ETF, check what it brings to your portfolio and how much it overlaps with your existing investments.
Remember that even if you combine several stock (also known as ‘equity’) ETFs to build a portfolio, it would still only consist of stocks. Depending on your goals and the level of risk you’re comfortable with, you may also consider other asset types, such as bond ETFs or commodities like gold and silver, which are available via other exchange-traded products (ETPs).
Read more about practical decisions about starting, investing regularly and rebalancing in Getting Started with Global Investing in the UK.
Frequently asked questions
Conclusion and key takeaways
Start with exposure, not price
Check the index, markets, companies, and investment strategy before comparing fees.
Understand the market coverage
World, all world, and emerging markets ETFs can provide different exposures and levels of risk.
Choose how to access emerging markets
An all world ETF can include them in one investment, while combining World and Emerging Markets ETFs gives you more control over your allocation.
Consider cost and diversification together
Compare total costs, including platform and trading costs, and only add ETFs when they provide genuinely different exposure.
Continue exploring global investing
Ready to start investing?
Getting started with investing doesn t have to be complicated. With a clear plan and a long term perspective, even small steps can make a difference over time. Many investors begin with a few simple steps:
Define your goals
Consider what you want to achieve and how investing fits into your plans.
Open an investment account
You'll need an investing account with an online investment platform, bank or provider.
Choose a suitable investment approach
A diversified portfolio may include equities, bonds and ETFs.
Start investing regularly
Investing gradually over time can help manage market fluctuations.