You want large companies for stability, but small companies for growth, and Australian shares for familiarity but global shares for diversification, right?
The question I’ll try to answer in this article is, does the iShares Core MSCI World All Cap ETF (ASX: IWLD) have it all?
What Are ETFs?
Exchange-traded funds, or ETFs, are investment funds that are listed on a stock exchange and provide exposure to a range of shares or assets with a single purchase.
The Rask Finance video below explains ETFs in more detail:
iShares World All Cap ETF
The IWLD ETF aims to track the performance of the MSCI World Investible Market Index by investing in companies both small and large, based in Australia and overseas.
To explain more simply what the fund invests in, we can look at the main holdings which are actually just other iShares ETFs. For instance, almost 56% of the fund is invested in the iShares S&P 500 ETF (ASX: IVV) which I’ve written about here.
While IVV provides the large-cap exposure, another 7% of IWLD is invested in the iShares S&P Small-Cap ETF (ASX: IJR) for the US small-cap exposure. You can read more about the IJR ETF here.
The iShares Core MSCI EAFE ETF (ASX: IEFA) makes up 33% of IWLD and invests in small, mid, and large-cap companies in developed countries excluding Canada and the US. And another 3.5% is allocated to the iShares Core S&P/TSX Capped Composite Index ETF (ASX: XIC), which provides exposure to the Canadian stock market, while the remaining 1.5% of IWLD is held in Australian dollars.
The end result is that around 62.8% of IWLD is invested in the US, with Japan, the UK and Canada receiving the next highest weightings.
Information technology is the sector with the highest weighting (15.92%), followed by financials (15.1%) and health care (12.41%).
Over the last three years, the World All Cap ETF has returned an average of 13.21% per year, with a 5.64% return over the last 12 months. These returns include the semi-annual distributions paid by the ETF. IWLD has a trailing dividend yield of 2.45%.
Fees & Risks
The management fee for IWLD is 0.09%, making this one of the cheapest ETFs on the ASX. While the fund is well-diversified across equities, it lacks any exposure to other asset classes like bonds, real estate or commodities. So, while this is a diversified fund, you shouldn’t consider yourself fully diversified if IWLD is all that you own.
The fund is also heavily weighted to the US stock market, so a market crash in the US would still severely impact your returns, at least in the short term.
My Take On IWLD
The World All Cap ETF may be an interesting way to go beyond a standard S&P 500 ETF and gain better diversification benefits without materially increasing management fees. However, you should consider the extra risk. It might not be my first pick for an ETF, but IWLD is certainly worth considering.
For our number-one ASX ETF pick, have a look at the free report below.
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Disclosure: At the time of writing, Max owns shares in the iShares S&P 500 ETF (ASX: IVV).