3 ETFs invested globally in the first quarter of 2022

Globally focused exchange-traded funds (ETFs) provide a direct way to diversify investment portfolios geographically. Due to the impact of the COVID-19 pandemic, the global economy contracted sharply last year, but it has begun to recover. The International Monetary Fund (IMF) estimated in October that the global economy will grow by 5.9% in 2021 and 4.9% in 2022. Global economic growth is expected to rebound this year, but individual economies will recover at a very different rate, depending on the speed of the COVID-19 mutation and the availability of vaccines. Investors seeking to participate in the global recovery should consider investing in ETFs of companies from different countries.

Key points

  • After the contraction caused by the pandemic last year, the global economy is expected to rebound this year and 2022.
  • The three ETFs used for global investment are SPDW, VWO and IXUS.
  • The first fund holds the most shares in Nestlé, and the other two funds have the most shares in TSMC.

The following outlines three types of ETFs that provide geographic diversification for global-minded investors. These funds are relatively cheap and very suitable for long-term buy-and-hold investments, but each ETF has a different approach. SPDW invests in developed countries, VWO focuses on emerging markets, and IXUS holds these two stocks, although it tends to own developed markets with larger companies. These funds may be useful to investors seeking international exposure that primarily hold portfolios of U.S. stocks. The volatility of developed markets is often lower than that of emerging markets, but there are often countries with slower economic growth, similar to investing in large-cap stocks and small-cap stocks. Our selection of funds is limited to funds traded in the United States, excluding leveraged and inverse funds and funds with assets under management (AUM) of less than US$50 million.

In the past year, the performance of the global (except the United States) benchmark MSCI All Country World Index lags behind that of the United States market. The total return of the index in the past 12 months is 9.8%, which is much lower than the S&P 500’s 28.9% as of December 9, 2021. Based on the performance of the past year, the best performer among the three ETFs listed below is the SPDR portfolio developed country (except the United States) ETF (SPDW). All figures below are as of December 10, 2021.

  • Performance over one year: 12.0%
  • Expense rate: 0.04%
  • Annual dividend yield: 2.21%
  • 3-month average daily volume: 1,831,875
  • Assets under management: $12.4 billion
  • Date of establishment: April 20, 2007
  • Issuer: State Street

SPDW is a large-cap fund that tracks the BMI index of S&P developed countries (except the United States), which almost only focuses on developed countries outside the United States. The index is weighted by market capitalization. Financial, industrial and information technology stocks account for nearly half of the ETF’s portfolio. SPDW is one of the cheapest global investment ETFs; a similarly priced fund is the New York Mellon International Equity ETF (BKIE), although the latter is newer and much smaller, so it may be less liquid. The largest holdings of the fund include Nestlé (NESN: SWX), a Swiss food and beverage group; ASML Holding NV (ASML: AMS), a semiconductor company located in the Netherlands; and sponsors of Samsung Electronics Co., Ltd. (SMSN: LON) GDR; a South Korean multinational electronics company.

  • Performance over one year: 3.6%
  • Expense rate: 0.10%
  • Annual dividend yield: 2.17%
  • 3-month average daily volume: 11,513,233
  • Assets under management: US$80.4 billion
  • Date of establishment: March 4, 2005
  • Publisher: Pioneer

VWO is a large fund that tracks the FTSE Emerging Markets Overall China A-Share Index. The index is market capitalization weighted and includes companies in emerging markets. VWO is one of the world’s largest and most liquid ETFs and the cheapest broad emerging market fund, investing in countries such as China, Taiwan, Brazil, and South Africa. Together with the aforementioned SPDW, it provides extensive exposure to global securities while minimizing costs. The fund’s highest holdings include Taiwan Semiconductor Manufacturing and Design Company TSMC (2330: TAI); Tencent Holdings Co., Ltd. (700: HKG), a Chinese Internet service and technology holding company; and Alibaba Group Holdings Co., Ltd. (9988: HKG) , E-commerce, Internet infrastructure, online finance and Internet content service providers.

  • Performance over one year: 9.9%
  • Expense rate: 0.09%
  • Annual dividend yield: 2.11%
  • 3-month average daily volume: 2,135,683
  • Assets under management: US$31.9 billion
  • Date of Establishment: October 18, 2012
  • Issuer: BlackRock Financial Management

IXUS seeks to track the MSCI ACWI ex USA IMI index, which is an index covering international developed and emerging market companies within a range of market capitalization. Financial, industrial, and information technology stocks account for the three largest parts of the investment portfolio. The fund’s holdings are well distributed geographically. IXUS provides a way to enter emerging and developed markets through a single fund. Investors who do not want to increase the complexity of their portfolio by investing in multiple funds outside the United States may want to focus on IXUS. IXUS’s largest holdings include TSMC, Nestlé and Tencent.

The comments, opinions and analysis expressed here are for reference only and should not be regarded as personal investment advice or advice on investing in any securities or adopting any investment strategy. Although we believe that the information provided here is reliable, we do not guarantee its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Due to the rapidly changing market and economic conditions, all comments, opinions and analyses contained in our content are presented on the date of publication and may change without notice. This material is not intended to provide a complete analysis of every important fact about any country, region, market, industry, investment or strategy.

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