Best world ETFs for Belgians

Why world ETFs a great investment for Belgians

World ETFs mix stocks from countries around the world, giving you a diversified investment. Essentially, you'll own thousands of stocks from around the world, earning dividends from the growth of the global economy.

The MSCI World index is a popular choice. It contains 1,500 stocks from 23 developed countries such as the United States, Germany and Japan. Developed by Morgan Stanley Capital International (MSCI), this index represents large and mid-cap companies. It offers broad diversification across North America, Europe and the Asia-Pacific region. Companies are selected on the basis of market capitalisation, with larger companies given more weight. For example, Apple and Microsoft account for almost 10% of MSCI World. The US dominates the index with 70% of market capitalisation, followed by Japan, the UK, France and Canada. However, emerging markets such as India and China are not included.

MSCI World's returns have also been excellent over the years. Since 1979, the MSCI World index has returned an average of 10.13%! If you had invested €10,000 in 1979, you would have about €900,000 today.

How to choose the best world ETF

With over 145 ETFs tracking a world index or a variant thereof, how do we know which is the best one to choose? It can be quite overwhelming to do the research.

To help us make a choice, we will compare the world ETFs below based on:

• Distribution of dividends. From a taxation point of view, accumulating funds are preferred over distributing funds to avoid paying a 30% tax on dividends.
• Domicile. Luxembourg and Ireland have special tax treaties with the US that make it attractive to set up funds there. As a Belgian investor, you can benefit from this by investing in funds that are domiciled in one of these two countries.
• Currency. If you buy a fund that is not traded in Euro (€), the broker will likely convert it  for you. But this comes at an additional cost.
• Size. Larger funds are less likely to be shut down.
• Replication. Physical replication is preferred over synthetic replication to reduce third-party risk.
• Cost. Fund managers charge a fee for managing their funds. The total cost of a fund is indicated by the total expense ratio (TER). Naturally, the lower the better!
• Sustainability. Some ETFs follow a sustainable version of an index where some companies have been excluded based on ethical views.

If you wish to dig deeper on the topic, we also published a resource that look at the tips you need to be aware of as a Belgian investor when buying ETFs.

The best world ETFs for Belgians

Based on the criteria above, we selected the following six world ETFs that could be of interest to you and which follow three different indices. Note that we chose the following criteria for all of them:

• Only accumulating funds to avoid 30% tax on dividends
• Registered out of Belgium for tax efficiency
• Only EUR funds to avoid currency risk
• Only physical replication ETFs

The performance of world ETFs

We analysed the performance of the six chosen ETFs since 2012:

What immediately stands out is that the performance of these ETFs doesn't vary too much. 2B7K slightly edges out the other ETFs in terms of returns. If all world ETFs are more or less the same, what to look out for when choosing one?

• Largest ETF: liquidity is a key component of ETF investing, which allows you to make transactions easier at a fairer price. IWDA (IE00B4L5Y983) is by far the most liquid ETF, nearly seven times larger than the second biggest fund! This is why many investors choose IWDA to invest globally.
• Sustainability: if sustainability is important to you, then 2B7K (IE00BYX2JD69) is a solid option. Do note that since it excludes certain companies, it provides less diversification than the non-sustainable world ETFs but it also has better returns in comparison to the other ETFs.
• Cheapest: ETFs which have a low expense ratio will benefit long term as the maximum amount of capital remains invested for the long term (instead of paying management fees). When it comes to costs, SWRD (IE00BFY0GT14) offers the lowest rate at 0.12% per year.

How to buy a world ETF

There are three steps:

1. Choose the world ETF that fits you best using our comparison above.
2. Open an account with a broker. Our comparison of brokers can help you choose.
3. Place an order!

We also created a step-by-step guide to investing in the MSCI World index through IWDA that can help you on your journey.

Curvo, an easy option to put your savings to work

At Curvo, we strongly believe that index investing is the best way for most Belgians to grow their wealth and prepare for their financial future. And we built Curvo to make index investing accessible to all Belgians.

The Growth portfolio is a great alternative to investing in a world ETF. The portfolio, along with the other portfolios, is managed by NNEK, a Dutch investment firm licensed by the Dutch regulator (AFM).

It's composed of two funds, both offered by Vanguard:

• FTSE Developed All Cap Choice index (ISIN: IE00B5456744)
• FTSE Emerging All Cap Choice index (ISIN: IE00BKV0W243)

Together, these funds cover the entire world and are a good approximation to an investment in the world economy like the MSCI World index offers.

Sustainable

Sustainable investing is challenging because everyone has different beliefs and values. The funds chosen in Growth focus on one guiding principle: they don't invest in companies that are considered destructive to the planet. This means the following sectors are excluded:

• non-renewable energy (nuclear power, fossil fuels)
• vice products (adult entertainment, alcohol, gambling, tobacco)
• weapons (civilian firearms, military weapons)
• controversial companies that do not meet the labour, human rights, environmental and anti-corruption standards defined by the United Nations Global Compact

No transaction tax

Each of the world ETFs we discussed is liable for the Belgian transaction tax. You need to pay this tax every time you buy or sell an ETF. But one advantage of Curvo is that the Belgian transaction tax is not applicable. This means you’re saving between 0.12% and 1.32% per transaction.

All your money is invested

Your investments work with fractional shares meaning that all your money is invested. When buying your own ETFs, you're required to buy whole units of shares. This can make it much harder to do invest monthly (which we recommend!) because you may have to wait several months until you've saved enough to buy a single share. You'll also always be left with some cash on your brokerage account.

You don't encounter these issues with the Growth portfolio. You can start investing from the first month, from €50, and every cent will be invested for you. You can also set up a saving plan to send contributions monthly and put your investments on autopilot.

Portfolio tailored to you

Next to Growth, you can invest in other portfolios, each suited for a different financial goal and appetite for risk. Each of these portfolios were built and are managed by NNEK. When you sign up to Curvo, you are asked a couple of questions to determine your goal and the risk you are seeking. NNEK then matches you with the portfolio that's best suited to you.

Explore how Curvo works if you want to learn more.

Buying ETFs is usually cheaper

Investing in one of NNEK's portfolios through Curvo is usually more expensive than buying MSCI World ETFs like the ones listed above through a broker. The fee starts from 0.6% “all-in” on your total investments, but provides you with peace of mind as  everything is taken care of: taxes, rebalancing, purchases, etc...

Summary

World ETFs help Belgians diversify their investments globally. They cover both developed and emerging markets. Factors such as tax efficiency, fund domicile and costs are important. Choose ETFs that match your financial goals. Consider a world ETF or a managed portfolio such as Curvo. Invest in line with your values and objectives and ensure a diverse and rewarding investment strategy.

We hope this list helps you decide which World ETF to buy. Whichever ETF you end up choosing, you've already made the right choice because ETFs are a great investment that offers diversification at a relatively low cost.

Questions you may have

What's the difference between MSCI World and MSCI ACWI?

Whereas MSCI World includes stocks from only developed markets, the MSCI All Country World index (ACWI) also invests in emerging markets. This makes MSCI ACWI a better choice for investors seeking a truly global exposure.

How does the MSCI World index perform vs other major indices?

We ran the analysis through Backtest and compared it with three other indices:

• MSCI ACWI: similar to MSCI World, but including developing markets into an All Country index.
• S&P 500: entirely focused on the US economy.
• Nasdaq-100: entirely focused on the technology stocks of the American economy.

The MSCI World is one of the most diversified indexes in the world, and as a result offers less fluctuations than indexes that are heavily concentrated in one region or industry (such as the S&P 500 and Nasdaq-100).