Investing in companies around the world can be a simple way to start investing. A broad global ETF gives you access to companies worldwide through one investment, but its value can still fall.
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
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Start with your goal, timeframe, and how much investment risk you are willing and able to take before choosing your investments.
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An ETF can provide diversified equity exposure without buying individual company shares separately, reducing the number of transactions required.
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Decide on an affordable amount and an investment routine you can maintain.
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Review the portfolio periodically but avoid reacting to every short-term market movement.
Can investing in companies worldwide be suitable for beginners?
Investing in stocks worldwide is one way investors can spread their money across companies in different countries and industries. A broad global ETF can provide access to many companies through a single investment, without requiring investors to select individual overseas shares or combine several regional funds.
This does not mean a world ETF will be suitable for every beginner. Whether an investment is appropriate depends on factors including your goals, investment timeframe, financial circumstances and ability to accept losses.
Before starting, it helps to answer three questions:
- What is the money for?
- When might it be needed?
- How much loss could be accepted without disrupting the plan?
For someone investing towards a long-term goal, a broad ETF investing in companies globally can provide a useful foundation. Money needed for emergencies or near-term spending should be considered separately.
How can you start investing globally from the UK?
Begin with setting a goal, then consider the investment account, investment approach and contribution amount. Making these decisions in order can help prevent the choice of ETF from driving the whole plan.
Set the goal and timeframe
Start with your goal and investment timeframe. This can help you choose suitable investments and stay focused when markets rise and fall.
Choose the investment account
Choose an account that suits your needs. A Stocks and Shares ISA, pension, SIPP, or General Investment Account can affect tax, charges, and access to your money.
Choose the investment approach
Investors can access global markets through index funds that track a market index or actively managed funds where professionals select investments.
Choose an ETF provider
Compare ETF providers by range, size, liquidity and track record. iShares is the world’s largest ETF provider and Europe’s leading ETF manager by AUM.1
Choose an affordable amount
Some platforms let you start with £1. Invest only what you can afford. Regular investing can help spread purchases across market ups and downs.
For a beginner seeking a straightforward equity holding, a broad index-tracking global ETF can reduce the need to select many separate investments. An ETF is a fund that can be bought and sold on a stock exchange, while its underlying index or strategy determines what it holds.
Two index-tracking iShares ETFs illustrate the choices available.
The iShares FTSE All-World UCITS ETF (FTAW) aims to reflect an index of large and medium-sized companies across developed and emerging markets. The iShares Core MSCI World UCITS ETF (IWDA) tracks an index including companies from developed markets only.
Both can provide broad international exposure, but they cover different investment universes. Neither approach is automatically right for every investor. The choice depends on the exposure required, the type of risk the investor is willing to take on, and how the ETF fits with other investments. The iShares FTSE All-World UCITS ETF (FTAW) may suit investors seeking a simple, globally diversified portfolio through a single fund and who are comfortable with its predetermined allocation to emerging markets. In contrast, the iShares Core MSCI World UCITS ETF (IWDA) may appeal to investors who prefer greater control over emerging market exposure, as it invests only in developed markets and allows emerging markets to be added separately if desired.
Before investing, check:
- the strategy, index and markets covered
- the countries, sectors and companies with the largest weights
- whether emerging markets or smaller companies are excluded
- the ongoing fund charge and platform costs
- whether income is reinvested or paid out
Review the ETF’s prospectus and other fund documents for full details on its investment approach, risks, income treatment, and costs.
Learn more about these differences in How to Compare Global ETFs and Build a Portfolio
Should you invest a lump sum or invest regularly?
A lump sum invests the available money at one time. Regular investing spreads purchases across a series of dates.
Regular investing spreads purchases across different dates and may be easier for people investing part of their monthly income to incorporate into a budget. A lump sum puts the available amount into the market sooner.
Neither approach guarantees a better outcome. The choice will depend on factors such as when the money is available, affordability, investment timeframe and individual circumstances.
How does currency affect global investors in the UK?
A UK investor can buy an ETF that trades in pounds and still have overseas currency exposure.
The ETF’s trading currency is the currency used to buy and sell it on an exchange. The underlying currency exposure comes from the companies and markets it owns.
If sterling strengthens against overseas currencies, the value of foreign holdings may fall when translated into pounds. If sterling weakens, their value may rise when converted into sterling. Currency movements can therefore increase or reduce returns.
The official iShares product information notes that overseas investments can be affected by movements in exchange rates.
What risks should a new investor in world ETFs understand?
Global diversification spreads exposure, but it does not prevent losses.
A global ETF can fall when stock markets decline. It may also be concentrated in particular countries, sectors or large companies because many global indices give greater weight to businesses with higher market values.
Other risks include currency movements, political or regulatory changes, emerging market volatility and investment costs. The risks will depend on the ETF’s holdings and index. Review the ETF’s prospectus and other regulatory documents for full details of the risks before investing.
How should you review your investments?
It can be useful to review your investments periodically to check that they still fit your goals and circumstances. A review does not necessarily mean making changes.
Consider whether:
01.
Your goal or investment timeframe has changed
02.
The amount you invest remains affordable
03.
Your financial circumstances or ability to accept investment losses have changed
04.
The ETF still invests in the markets and companies you expect
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The costs or features of your investment account have changed
If your portfolio contains several different investments, their proportions can change over time as markets move. Rebalancing means making adjustments to bring those investments back towards the proportions you originally intended.
Rebalancing is not necessary simply because markets have moved, and buying or selling investments can involve costs and may have tax implications. Whether changes are appropriate will depend on your portfolio and individual circumstances.
What should you do when markets fall?
Falls in investment value are a normal possibility when investing in stock markets, but they can be difficult to experience.
A fall in the market does not, by itself, determine whether you should buy, sell or continue holding an investment. Investing with a long-term perspective can help you stay focused on your goals rather than trying to predict short-term market movements. Trying to time when to enter or leave the market can be difficult and may mean missing periods of recovery.
Consider whether your goals, timeframe, financial circumstances or ability to accept losses have changed, as well as whether the investment still works as you expected.
If you are unsure whether an investment remains appropriate for your circumstances, consider seeking regulated financial advice.
Frequently asked questions
Conclusion and key takeaways
Understand what investing in world ETFs means
A global ETF can provide access to shares in companies across multiple countries and industries through a single investment, but diversification does not prevent losses.
Start with your circumstances, not the investment
Consider your goal, timeframe, financial circumstances and how much investment risk you are willing and able to take before choosing an investment.
Understand your account and investment
UK investment accounts differ in rules, tax treatment and access, while global ETFs vary in the markets and companies they include.
Keep your investments under review
Your circumstances and investments can change. Review them periodically to check they still meet your objectives and remain appropriate for you.
