When it comes to portfolio construction, one popular way to insulate yourself and diversify with exchange traded funds (ETFs) is to invest in an all-world fund. This way, you can own many stocks from around the world and stop the constant analyzing.Last year was the test of all tests, as investors sold off undervalued and overvalued stocks and ETFs, leaving the general attitude toward equities down. If market sentiment is down and the constant analysis of stocks and market trends has got you even more confused, the all-world ETF can be a solution, explains Richard Morrison for Financial Post.
All of the broad-based ETFs have gone in the same direction as the general market, hitting lows in March, but have rebounded nicely for the past two months. Many of the online searches that have been conducted have shown that many of the all-world ETFs are dominated by the same giants: Exxon Mobil Corp. (XOM), Microsoft Corp. (MSFT), AT&T Corp. (T), Johnson & Johnson (JNJ), Procter & Gamble Co. (PG), Chevron Corp. (CVX), General Electric Co. (GE) and IBM Corp. (IBM).
Another search found that some of the all-world ETFs are plays on a certain sectors, such as industrials, consumer staples, agriculture, gaming, luxury goods, shipping and so on. Investors might find all-world ETFs appealing if they’re having trouble zeroing in on a particular sector or if they’d like to take a “set it and forget it” approach.
Remember to watch the trend lines, though.
- Vanguard FTSE All World-ex U.S. (VEU): up 6.8% year-to-date
- iShares MSCI ACWI ex-U.S. (ACWX): up 5.8% year-to-date