VWCE vs IWDA: which is better for you?

What is VWCE?

The VWCE ETF (ISIN: IE00BK5BQT80) is popular in the index investing community. The fund was launched by Vanguard in 2019 and currently holds more than €5 billion under management. Vanguard is one of the largest asset managers in the world, and its founder Jack Bogle is often credited as the inventor of the index fund.

VWCE tracks the FTSE All-World index, a combination of the FTSE Developed Markets index and the FTSE Emerging Markets index. The index consists of over 4,000 stocks. Because it's so diversified, investors can find in VWCE a great way to follow the global stock market by holding a significant portion of the world's stocks. Companies such as Apple, Microsoft, Amazon, etc… are represented in the index. The FTSE All-World index has delivered an average of 8.9% per year since 2005.

What is IWDA?

IWDA is a global ETF that tracks the MSCI World index, composed of about 1,500 stocks from 23 countries that economists qualify as "developed": United States, Germany, Japan… The fund is offered by iShares, a brand of BlackRock. BlackRock is an immense asset manager, just like Vanguard, with over $2 trillion invested.

The returns of IWDA have also been excellent throughout the years. Since 1979, the MSCI World index has delivered an average return of 10.9%! If you had invested €10,000 in 1979, you would have had around €900,000 today.

VWCE vs IWDA

The most significant difference between VWCE and IWDA is that they track different indexes. VWCE tracks the FTSE All-World index, whereas IWDA follows the MSCI World index. This means that VWCE is a total market fund, investing in both developed markets and emerging markets, while IWDA covers only developed markets. Also, IWDA is slightly cheaper with a total expense ratio of 0.20% (VWCE costs 0.22% per year).

But that's not the complete picture. We compared them on a range of criteria:

• performance
• diversification
• cost of the funds
• taxes
• broker fees
• replication
• suited for monthly investing
• size of the funds
• sustainability
• governance of the fund provider

Performance: tie

The graph above shows that the historical performance of VWCE and IWDA has been close to equal. Both have yielded an average yearly return of around 8.8%, which is considerable especially compared to a savings account! The large overlap of the stocks and their weights in the FTSE All-World and MSCI World indices explains the similarity.

Diversification: VWCE wins

VWCE is more diversified. The underlying index, the FTSE All-World index, consists of over 4,000 stocks, while the MSCI World index is composed of "only" 1,500 stocks. The inclusion of emerging markets in the FTSE All-World index explains the difference. The MSCI World index includes only stocks from "developed" markets (United States, Germany, Japan...).

We saw that the past performances of VWCE and IWDA do not differ much. Emerging markets represent a relatively small part of the total stock market, so including them has little effect on the overall price. However, it's a good idea to diversify more when you get the chance. The weight of emerging markets may increase in the future, and you will benefit from this growth when investing in VWCE.

Cost of the funds: IWDA wins (slightly)

The cost of an ETF is measured by the total expense ratio, often abbreviated as "TER". It's the fee that the fund provider charges for managing the fund, and it's expressed as a yearly percentage on the amount you invest. At 0.20%, the TER of IWDA is slightly cheaper than that of VWCE, which is 0.22%.

Taxes: IWDA wins

Taxes are an important consideration when choosing an ETF. Both VWCE and IWDA fulfil some fiscal best practices, particularly for Belgians:

• ✅ They're both accumulating, meaning that neither requires you to pay dividend taxes. Instead, dividends are automatically reinvested in the fund.
• ✅ They're both domiciled in Ireland. We prefer funds domiciled in Ireland or Luxembourg because they're slightly more optimised fiscally, as these two countries have special tax treaties with the US.
• ✅ They both invest only in stocks. So no Reynders tax has to be paid, which is the Belgian tax on capital gains for bonds. Fortunately, in Belgium there's no tax on capital gains for stocks!

But, the Belgian transaction tax (TOB) rate for VWCE is 1.32% whereas it's 0.12% for IWDA.

Broker fees: IWDA wins

Both VWCE and IWDA are available for free on BUX and DEGIRO.

But for IWDA, the fees for the other brokers tend to be lower. That's because the ETF also trades on Euronext Amsterdam. Many Belgian brokers as well as foreign brokers active in Belgium, have cheaper fees for Euronext exchanges. VWCE trades only in Germany and Italy, resulting in slightly higher fees for us.

Transaction costs for VWCE:

Transaction costs for IWDA:

Replication: tie

Both VWCE and IWDA are physically replicated, which is the safest as it means the fund providers hold the actual stocks in the index. This is unlike synthetic replication, where the performance of the index is replicated through financial engineering.

Suited for monthly investing: IWDA wins

Investing part of your income every month is the best strategy for most people. It simplifies saving and budgeting because your investments follow the rhythm of your income. It also removes the temptation of timing the market. Market timing is incredibly difficult and most often leads to a worse outcome. On top that, it can bring negative emotions such as stress or regret. In contrast, monthly investing brings peace of mind.

IWDA trades around €60 whereas VWCE trades around €90. Most brokers do not offer fractional shares, meaning you have to buy whole units of a share. The lower stock price makes IWDA easier for monthly investing, as you will have less cash on your brokerage account not working for you.

Size of the funds: tie

Over €40 billion is invested in IWDA, and VWCE has €5 billion invested. That's a large difference. But both funds are sufficiently large that the risk of either shutting down by their provider is minimal.

Sustainability: neither

Neither IWDA or VWCE exclude companies based on sustainability criteria. Fossil fuel industry, weapon industry, companies that do not meet certain standards for labour rights... it's all in there.

Governance of the fund provider: tie

The Vanguard Group in the US has a unique structure where the company is owned by its funds, which in turn are held by the shareholders of the fund. So by purchasing shares of a Vanguard fund, you effectively become part owner of Vanguard. This organisation ensures that the goals of Vanguard are aligned with its investors, and it has allowed the company to constantly lower the fees of their funds as economies of scale are passed on to investors.

Unfortunately, Vanguard's presence in Europe does not follow this mutual ownership model. Instead, it's more in line with traditional asset management firms, where the company operates as a subsidiary of the US-based Vanguard Group. This means that the benefits of the mutual ownership structure in the US do not apply to European investors. Subsequently, the fees of Vanguard's funds in Europe might be slightly higher compared to their US counterparts.

In summary, there are no differences between BlackRock and Vanguard in terms of governance for European investors.

Verdict: it mostly depends on your broker

Costs and taxation aside, VWCE is slightly better because of the greater diversification. But depending on your broker, you may pay higher fees and Belgian transaction tax when investing in VWCE than IWDA. In that case, IWDA can be a better trade-off.

Comparison table

VWCE vs IWDA + EMIM

EMIM is an ETF that tracks the MSCI Emerging Markets IMI index. By combining IWDA with EMIM, you make up for IWDA's shortcoming of investing only in developed markets by adding stocks from emerging markets into the mix. EMIM is offered by BlackRock, the same provider as IWDA.

The market capitalisation of emerging markets is about 12% of the global stock market. So in the following comparison,, we assume that our IWDA + EMIM portfolio is composed of 88% IWDA and 12% EMIM.

Performance: tie

The performance of VWCE and IWDA + EMIM has been very similar in the past. Since 2005, IWDA + EMIM has returned an average 8.8% per year, and 8.7% for VWCE. This difference is not significant enough.

Diversification: IWDA + EMIM wins

With the addition of EMIM, the combination of IWDA and EMIM contains 4,500 stocks. This is slightly more diversified than VWCE, mainly because the MSCI Emerging Markets IMI also contains small companies from emerging markets, whereas VWCE focuses on medium-sized and large companies.

Cost of the funds: IWDA + EMIM wins

The total expense ratio of EMIM is 0.18%. With a 88/12 split, this means that IWDA + EMIM has a combined TER of slightly less than 0.20%. This is lower than VWCE, with a TER of 0.22%.

Taxes: IWDA + EMIM wins

EMIM checks all the important tax considerations we saw above: it's accumulating, domiciled in Ireland, and fully invested in stocks. The Belgian transaction tax of EMIM is 0.12%, just like it is for IWDA. We saw earlier that some brokers charge a 1.32% tax rate for VWCE. So IWDA + EMIM is better than VWCE in terms of taxes.

Broker fees: VWCE wins

EMIM is almost free at €1 per trade on DEGIRO and BUX (watch out though as you have to pay a subscription fee though). Unless you use either of these brokers, you are going to pay broker fees for every purchase and sale. And a single ETF is almost always going to be cheaper than two ETFs, as brokers charge per transaction. So when it comes to broker fees, VWCE is a better option than IWDA + EMIM.

Transaction costs for EMIM:

Replication: tie

VWCE, IWDA and EMIM are all physically replicated, which is preferred over synthetic replication.

Suited for monthly investing: VWCE wins

Investing monthly means you pay broker fees every month. VWCE is better for monthly investments than IWDA + EMIM because buying a single fund is almost always going to be cheaper than buying two.

Size of the funds: tie

The size of EMIM is €13 billion, so the risk of BlackRock closing the fund is minimal.

Sustainability: neither

The MSCI Emerging Markets IMI index does not exclude companies based on sustainability considerations. All the companies that are bad for the planet and society are present in VWCE, IWDA and EMIM: the weapon industry, fossil fuels, gambling, etc...

Comparison table

Verdict: VWCE is preferred in most cases

A single-fund portfolio has a few advantages compared to a portfolio of several funds IWDA + EMIM. For one, it reduces broker fees. Secondly, a single fund is easier to manage because you don't need to worry about rebalancing. You need to periodically rebalance the IWDA + EMIM portfolio to maintain the 88/12 split.

However, the broker fees and Belgian transaction tax can be expensive for VWCE, especially if you invest monthly. In that case, the IWDA + EMIM combination may end up being cheaper. We refer you to our broker comparison tool to make the calculations!

VWCE vs Growth portfolio

A last option is the Growth portfolio accessible through the Curvo app. It consists of two funds:

• 80% of the portfolio is allocated to Vanguard ESG Developed World All Cap Equity (ISIN: IE00B5456744), which tracks the FTSE Developed All Cap Choice index.
• 20% of the portfolio is allocated to Vanguard ESG Emerging Markets All Cap Equity (ISIN: IE00BKV0W243), which tracks the FTSE Emerging Market All Cap Choice index. 80% of the portfolio is allocated to the fund.

Both funds are offered by Vanguard, the same provider as VWCE. The portfolio was built and is managed by NNEK, a Dutch investment firm licensed by the Dutch regulator (AFM).

Let us compare VWCE to Growth.

Performance: tie

Looking at the historical performance of VWCE and Growth, we can see that they are very similar. Both have delivered an average yearly return of around 8.8% since 2005.

Diversification: Growth wins

The total number of stocks in the Growth portfolio is 9,513. This is more than double the amount of companies in VWCE, so Growth is more diversified than VWCE. The reason is that the indices in Growth also contain small companies, whereas VWCE focuses just on medium-sized and large companies.

Cost of the funds: VWCE wins

The combined total expense ratio of the Growth portfolio is 0.21%, which is slightly lower than VWCE's 0.22%. But using Curvo also comes with a management fee (starting from 0.6%), because it's an app that offers many benefits compared to a broker. We explain these below.

Taxes: Growth wins

For Belgian investors, the funds in the Growth portfolio aren't liable for the Belgian transaction tax. This is an advantage compared to VWCE, whose tax rate is 1.32% for many brokers.

Broker fees: Growth wins

There are no broker fees when investing in the Growth portfolio. The reason is that the funds in Growth aren't ETFs but index funds.

ETFs and index funds essentially the same in that both track an index. The main difference is that ETFs are traded on a stock exchange whereas index funds are purchased directly from the fund provider (which is Vanguard for the funds in Growth). Because no broker is needed to buy the funds in Growth, there are no broker fees!

Replication: tie

Both funds in Growth are physically replicated, like VWCE. This is preferred over synthetic replication.

Suited for monthly investing: Growth wins

Monthly investing is a winning strategy for most people, and Curvo is particularly well-suited for periodic investing:

• Your investments with NNEK, through the Curvo application, support fractional shares. Rather than having to buy whole shares of an ETF, it's possible to buy fractions of each fund in the Growth portfolio. This means all your money is always put to work.
• Automatic investing with direct debit. Through Curvo, you can set up a monthly savings plan. Every beginning of the month, an amount you choose is debited from your bank account and automatically invested for you. Saving is easy when it's automated!
• No transaction costs. There are no Belgian transaction tax nor broker fees when investing through the Curvo app. So you're not paying more fees when investing monthly than investing a lump sum in one go. When investing through a broker, you're often penalised for investing more frequently because of the transaction fees.

Size of the funds: VWCE wins

The sizes of the funds in the Growth portfolio are €954 million and €82 million. This is smaller than VWCE, so there's a higher risk of Vanguard shutting down these funds than for VWCE.

However, you don't have to worry about this. If it were to happen, the funds will be replaced by suitable alternatives and your investments will automatically be brought over.

Sustainability: Growth wins

The portfolios are built according to one guiding principle: we don't support companies that we consider destructive to the planet. This means that certain types of companies are excluded from the portfolio:

• Companies in the fossil fuel industry.
• Companies that are active in vice products, like tobacco or gambling.
• Companies that do not meet the labour, human rights, environmental and anti-corruption standards defined by the United Nations Global Compact.

In contrast, all companies are included in VWCE, no matter how bad they are for the planet or society.

Verdict: the Growth portfolio is best for monthly investing

Because of the support for fractional shares and the ability to automate monthly investments, the Growth portfolio accessible through Curvo is the better option for periodic investing. It is also more diversified than VWCE. And perhaps most importantly, it is sustainable in that it excludes the companies that are destructive to the planet and society. However, it's more expensive than managing your own portfolio of ETFs with a broker.

Comparison table

Curvo: all the work is done for you

The difficulties of managing your own portfolio of ETFs

Choosing a single ETF like VWCE or IWDA is not the entire story when investing your life savings. Stocks are a risky asset class, and not everyone can psychologically handle their fluctuations. To bring success over the long term, you need to build a portfolio of ETFs that is suited to your goals, your appetite for risk and your capacity for taking risks. But this is not an easy task as there are thousands of ETFs to choose from. Furthermore, this portfolio of funds needs to be kept in balance over time, and adapt to changes in your life situation. When managing your own portfolio, these responsibilities fall onto you.

We saw most of our friends not investing because of these difficulties. Or they tried but stopped after a while because they didn't trust themselves enough to make the right financial decisions for their future. Yet, we think investing in ETFs or index funds is a powerful tool to improve our financial well-being. That's why we built Curvo: to take care of all the complexities of good investing so you don't have to worry.

Index investing without hassle

Curvo addresses the challenges of managing your own investments through a broker:

• Portfolio of index funds built for you. You are asked a few questions at the start to learn about you and your goals. Based on your answers, you are matched with the best portfolio of index funds for you. This can be the Growth portfolio, but also any of the other portfolios. The point is that you don't need to decide which ETFs to buy. All portfolios are managed by NNEK, a Dutch investment firm supervised by the Dutch regulator (AFM).
• Diversification. We firmly believe in the power of diversification to lower risk and seek investment returns. Each portfolio consists of over 7,500 companies, diversified across sectors and countries.
• Invest sustainably. Your investments focus on one guiding principle: don’t invest in companies that are considered destructive to the planet. Sectors like non-renewable energy, vice products, weapons and controversial companies are all excluded.
• Rebalancing done for you. No need to worry about keeping your portfolio in balance, this is handled for you.
• Fractional shares. All your money is invested. There’s no cash left sitting on the side.
• Automated monthly investing. Set up your monthly plan and get peace of mind that your money is working for you.
• Start from €50. No need for a large lump sum to get started.
• Project your savings into the future. Through Curvo you can see how much your portfolio is expected to be worth in the future. You can answer questions like “how will increasing my monthly contribution by €50, €100 or €200 affect my long-term savings?” to give a concrete idea for the “future you”.
• Withdraw anytime. There’s no long-term contract or exit fees if you wish to stop investing.

What you should do now

1. Decide if VWCE, IWDA, IWDA + EMIM, or Growth suits your better. Ask yourself:

• Do you care about diversification among emerging markets?
• Does your broker offer free trades?
• Do you want to manage your own investments? See how Curvo compares to DIY investing.

1. If you're convinced of investing in IWDA, follow our guide to buy your first share.
2. If you're looking for more options of ETFs, check out some of the best ETFs for Belgians.