Vanguard FTSE All-World UCITS ETF (VWRL) – Perfect for expats
Is Vanguard FTSE All-World UCITS ETF (VWRL) the perfect funds for British expats?
Spoiler alter: We think so. Here’s why:
- Easy access
- Diversification
- Global
- Includes emerging markets
- Covers all the major sectors
- Contains real estate, gold and commodities
- Low cost
- Uses a market-cap weighted strategy
- Has a dividend auto-reinvest option
Lets get into it.
Easy access
ETF stands for Exchange Traded Fund. There’s a whole host of benefits with this type of fund that we’ve talked more about here. But key for expats is access. The clue is in the name. These funds are freely traded on exchanges meaning anybody with an investment account has can invest.
And I’m sure it goes without saying that anybody includes British expatriates.
Unlike some other fund types that are popular in the UK (OEICs come to mind), we can invest in these from wherever we are!
Diversification
Think about it this way. Whether you a reading this article on a laptop, your iPhone or an Android device the company who made it will almost definitely be included in VWRL.
Even if you are reading this first thing in the morning, I’m guessing you’ve already interacted with some of the companies in the fund. I mean have you brushed your teeth yet? If so who made that toothpaste? Who made the brush? Even if they are some kind of obscure brands that aren’t listed in the fund in all likihood the company that made the packaging will be or the company that transported them to your house or the super market you bought them from.
The fact of the matter is unless you live under a rock, you will be encountering VWRL companies 24/7 and the best news is you are not alone. The vast majority of the world’s population will be buying products and services from companies you own.
Because when all said and done, the fund owns pieces of these businesses and you own a piece of the fund. It means you are an owner who will share in the profits these companies make.
Your money will be spread across the globe.
And this means your money will be highly diversified. You’re not going to be putting all your eggs in one basket. See the top 10 holdings list below:
Top 10 holdings
| Companies | Portfolio weight |
| Apple Inc AAPL | 4.14% |
| Microsoft Corp MSFT | 3.86% |
| NVIDIA Corp | 3.53% |
| Amazon.com Inc AMZN | 2.06% |
| Meta Platforms Inc | 1.42% |
| Alphabet Inc* | 1.19% |
| Alphabet Inc* | 1.02% |
| Eli Lilly & Co | 1.02% |
| Broadcom Inc | 0.92% |
| Taiwan Semiconductor Manufacturing Co Ltd | 0.89% |
The most you have allocated to one company at the moment is 4.14% (for Apple). If the biggest stock Apple went bankrupt it would only impact 4.14% of your portfolio. The impact of any other company going bump would be even less.
You can’t say that about many funds.
Global
Lots of people put too much money into their home markets. For example, Brits like the FTSE 100 and Americans like the S&P500. It makes sense. You feel safer investing in companies you are familiar with, but just because you feel safer doesn’t make it so. In fact, putting too much of your money in your home market is called Home Bias and its a phenomenon in investing that you want to avoid if maximizing your wealth is the priority.
You can read a lot more about this here if you are interested but I think investment author and former hedge fund manager Lars Kroijer puts it best when he says:
You should absolutely diversify, and a global equity index tracker is the most diversified investment, in terms of equities, that you can possibly get your hands on.
Source: The Evidence Based Investor
Just to be clear then, VWRL is global with a capital G, with exposure to companies in 40 Countries. If the UK never recovers from Brexit, you can relax, knowing that you’re invested in another 39 countries. If China takes over the US, you can relax knowing you are invested in all the major Chinese listed companies that matter.
Here’s how your money would be spread out over the top 10 countries.
| United States | 62.8% |
| Japan | 6.0% |
| United Kingdom | 3.7% |
| China | 2.6% |
| France | 2.5% |
| Canada | 2.4% |
| Switzerland | 2.3% |
| India | 2.3% |
| Germany | 2.0% |
| Australia | 1.9% |
Emerging Markets
The 40 countries in in the index the fund follows include emerging markets (EM), and that’s not something most investors are likely to want to miss out on. There are some cheaper global funds out there, but they don’t often contain EM.
Now some will use the argument that developed market companies do lots of business in emerging markets negating the need to invest in emerging markets companies themselves.
And whist there’s some truth to that, if only it was that simple. Nobody knows where the next Tesla or Apple will come from. Perhaps, it will be the US again, but perhaps it will be China or India.
Have a look at the graph below (courtesy of Google):
At the time of writing, companies listed in China have just gone up about 30% in a week (October 2024). The western companies that do business in China haven’t gone up anywhere near as much. If you didn’t have exposure to actual Chinese companies you missed out on that. With VWRL you didn’t!
As famed Princeton economist Burton Malkiel says in his best selling book, “A Random Walk Down Wall Street,” choosing individual stocks is like trying to find a needle in a haystack. Why try and guess when you can own the world.
With this fund you have just about everything. As well as emerging markets, you’ve got North America, Europe, Pacific and the Middle East.
In other words, when it comes to geography, you’re covered!
Sectors
For the same reasons as mentioned above you don’t want to be focused on any one sector, you want to spread you bets. And luckily, as well as geographic exposure your covered sector wise too.
The following should be enough for most investor’s needs:
| Sector | Exposure |
|---|---|
| Technology | 27.2% |
| Financials | 14.8% |
| Consumer Discretionary | 13.1% |
| Industrials | 12.9% |
| Health Care | 11.1% |
| Consumer Staples | 5.3% |
| Energy | 4.3% |
| Basic Materials | 3.1% |
| Utilities | 2.9% |
| Telecommunications | 2.8% |
| Real Estate | 2.4% |
Real Estate
If I had a tenner for every time somebody told me to add real estate to my portfolio I really would be rich man.
And the thing is I totally agree.
Of course they are talking about adding dedicated real estate exposure through REITs, but if you invest in this Vanguard fund you’ll have shares in all the real estate companies that matter.
The FTSE All-World index contains about 2.4% real estate, but the thing is that doesn’t include all the property owned by all the other companies in the index.
It also doesn’t include all the banks. Think about how the big banks make money. The Halifax and Nationwide don’t each have a property index for nothing. They have them because property is how they make their money ie through mortgages.
There aren’t many companies out there that don’t have some exposure to real estate. Whether it’s factories they own or offices they rent. A lot more than specific real estate companies will own or borrow bricks and mortar in some form or another.
Gold
As with real estate, there are a log of gold bugs out there that think you should have gold in your portfolio for a rainy day (or more precisely for when the world ends!)
But again, the fund has got you covered. Though it doesn’t contain physical gold, that doesn’t mean there isn’t any gold exposure in the fund. 4 of the top 5 gold companies in the world are included.
These companies will make money when the gold price goes up. In fact, unlike the shiny metal itself they also have the potential to make money when the price of gold isn’t increasing.
Commodities
As well as gold, the fund contains plenty of exposure to commodities. Take oil for example, 7 of the top 10 oil and gas companies can all be found in the fund.
Low cost investing
It was Albert Einstein that said:
Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.
And never a more clear reason to invest was put forward. However, Vanguard’s late founder and instigator of the first ever index fund, John C.Bogle, twisted these words to illustrate something else very important in investing:
What happens in the fund business is that the magic of compounding returns is overwhelmed by the tyranny of compounding costs.
(source: PBS documentary series Frontline – The Retirement Gamble)
In other words, keeping fees low should be a priority.
The expense ratio or Ongoing Charges Figure (OCF) is 0.22%. That’s £2.20 for every one thousand pounds you have invested. Whilst it’s not the cheapest global fund, it would be hard to argue that it’s not extremely low cost.
Yes, there are cheaper options out there but more often than not they don’t contain emerging markets.
Market-Cap Weighted Strategy
The fund uses a market cap-weighted strategy. In simple terms you invest according to what the wider market thinks. And when you stop and think about it is a great thing to do.
That’s because the market is made up primarily of financial professionals, with all the latest equipment, data, top notch educations and all rest of it.
In turn it means you use more of your money to buy what’s good and less of your money to buy what’s bad.
Really good companies will float to the top of the index and really bad companies will drop out of the index.
It’s a great system because you put more of your money in to companies as they are growing and less of your money into companies that start decaying.
Some people have a problem with this idea of doing things according to what the market thinks because on occasion there have been a few superstar investors that have taken advantage of gaps in this approach. However, such times have been few and far between. And in fact, they are getting fewer and farer everyday.
9 times out of 10 over the long term the market beats professionals, meaning if you invest in VWRL you will likely beat 90% of professional investors. If you don’t believe me it might be worth popping over to S&P Global and having a look at their SPIVA research.
As a result, unless, you are the next Warren Buffet, the cap-weighted approach is perhaps the simplest, safest way to invest.
VWRP
I would be remiss if I didn’t mention VWRP. It’s practically the same fund. There’s just one slight difference you need to be aware of.
VWRL pays a dividend into your brokerage account every quarter. VWRP does not. It puts that dividend straight back into your fund.
Some investors like to receive dividends into their account directly whereas others want them automatically reinvested. The latter are called ‘accumulating funds.’
With VWRP you get exactly the same thing as VWRL, but your dividends are automatically reinvested. Giving you one less thing to think about.
Global All Cap
One of the biggest criticism of the fund is that it only includes large and medium sized companies. There are some global all cap funds which cover the total global stock market.
And while those who say such things do in fact have a point it’s not a big one by any means. Let me explain.
- They are only really talking about 5% of the market.
- Small companies tend to be small because they aren’t as good as the bigger ones.
- If a small company gets does well and gets a bit bigger it will enter Vanguard All World.
- The fund does contain mid-cap companies and these do tend to perform pretty similarly to small caps. (Check out the graph below)
- There will still be plenty of room for growth which you will capture anyway. Comparing one of the smallest companies in VWRL, Ashmore Group to the biggest, Apple we find that the bigger of the two is worth 1250 times as much right now.
- In other words there’s plenty of opportunity for growth capture in this fund.
Small vs Mid-Cap
The following graph compares different sized companies in the UK. I picked the UK because I just happened to have the data for another article. I’m pretty sure its going to be similar no matter where you look.
Note the red (UK small cap) and grey (UK mid cap) lines. They are almost identical.
In other words, I don’t think the majority of people reading this need to sweat over small-caps…….. but……
Lifestrategy 100
If you really want small-cap exposure you might like to consider another product from Vanguard called life strategy. You can read more about it here, but the headline is it is very similar to VWRL but with the added bonus of smaller companies.
If small companies are really important to you, you may want to give this a look.
Investing isn’t 100% straight forward. I say that because British expats for example, usually don’t have access to the UK version of Lifestrategy because in the UK it is an index fund rather than an ETF and index funds aren’t as widely available as ETFs.
That’s just to say, you usually need to be UK resident to invest in that fund. Or another way of looking at it is this. Its not usually available to expats.
Now that said, there are European versions of Life Strategy that come in ETF format that everybody has access to.
Lifestrategy are essentially a one stop shop fund that contain stocks and bonds. These could be perfect for anybody living or intending to retire in Europe. However, for the variants that contain bonds such as the Lifestrategy 60 a UK investor not in Europe might want to avoid them due to currency risk involved in European bonds.
With the Lifestrategy 100 you don’t have this currency problem, though. That’s because the 100 in the name refers to the percentage of stocks in the fund. 100% stocks leaves no room for any bonds and no room for currency risk.
So if you are particularly keen on investing in smaller companies and your investment platform has Lifestrategy 100 you could think about putting your money there.
Just be aware this fund will usually cost you a littel more. Ongoing charges are slightly higher at 0.25% and the funds are denominated in Euros so unless you have Euros to spend you will need to pay to exchange currencies.
Alternatives
There are plenty of alternatives out there. However, most of these are either more expensive or lack exposure to emerging markets.
But there is one strong contender from Invesco. Its a very similar fund for dare I say it an even lower price. But its not all rosy. There’s a detailed comparison of the two here if you are interested.
But is it a good investment?
All in all, British Expat Money think Vanguard FTSE All-World UCITS ETF in either VWRL or VWRP format is a perfect way for British expats to invest.
Its low cost. Tax efficient and you get to be invested in just about all the companies that matter no matter who you are or where you are.
If the world is operational then your companies will be selling products and services internationally 24/7.
And shares in those companies means shares in profits for you.
