My recommendations for equity ETFs

So, you decided you want to invest in index funds but are not sure which specific funds you should pick. Or rather, you read a few personal finance books, saw the recommendations for funds like VTI  or VXUS, realized that those funds aren’t available to European investors and are not sure how to proceed.

I will try to suggest some equity funds which I think are useful for most European investors. In case these funds are not applicable to you due to broker restrictions or personal preferences, I think you can learn from the reasoning behind my recommendations as well.

I usually recommend global market capitalization weighted equity funds. This way you get exposure to stocks from the whole world without having to buy specific funds for each country/region. By buying a single fund you reduce your transaction costs. With a single fund you also don’t have to spend time rebalancing your positions since the fund takes care of it. Additionally you also avoid home bias, by getting exposure to each country according to its market capitalization.

My recommendation for distirbuting funds is “Vanguard FTSE All-World UCITS ETF” (VWRL). It isn’t the cheapest: the TER is 0.25% where a Vanguard S&P 500 ETF would have a TER of 0.07%. But I think the price is worth the time and transaction costs savings that come with the simplicity of not having to fiddle with your portfolio.

VWRL is a distributing fund therefore it is not tax efficient in countries where Distributing and Accumulating funds are taxed differently.

If you prefer accumulating funds I would suggest the “SPDR MSCI World UCITS ETF” (SWRD, TER 0.12%) along with the “iShares Core MSCI Emerging Markets IMI UCITS ETF” (EMIM, TER 0.18%). I would then suggest weighting these two funds according to the market cap of the index: 88% SWRD, 12% EMIM.

I used to recommend the “iShares Core MSCI World UCITS ETF USD” (SWDA, TER 0.2%) instead of the SPDR ETF but the SPDR ETF is cheaper in the long run. The iShares fund is also good.

Alternatively if you want a single accumulating fund you can pick the Vanguard FTSE All World ETF (TER 0.25%).

iShares also has a fund which tracks the whole world, SSAC, but I would not recommend it since it is more expensive (TER 0.6%) and you can achieve a similar result by using SWDA and EMIM at less cost – naturally this depends on how much you are spending on transaction costs so you have to do the math yourself.