Which global shares ETFs can you buy? Here’s a few options... (2024)

My confidence to invest in shares comes from an abiding belief that very clever humans will always find very clever ways to combine capital and labour to produce additional value.

If I buy a share of those very clever people’s companies, I’ll get to share in those gains.

So, do I believe Australians are the only humans capable of being clever? Well, no.

Having only invested in Aussie shares so far, I’m conscious I’m heavily weighted towards clever locals doing clever things in banking and mining – the behemoths of our sharemarket.

So, this week, I went shopping for an exchange-traded fund (ETF) to get me exposure to some clever people living in the rest of the world.

Of the more than 200 ETFs listed on the Australian Securities Exchange, only a handful met my desired criteria of comprising global shares, passively tracking an index (without being actively managed), not being aimed at a particular sector, and not targeted at any other factors, including perceived sustainability, quality, or growth prospects.

I found three ETFs of particular note, which you might consider if you are looking for something similar.

Please note first that I am a journalist. I am not qualified to give financial advice or to advise you on which investments you should buy, sell or hold. You must always do your own research, consider your own personal situation and the potential tax and currency implications of investing in international shares (which I’ll get to briefly at the end of this column).

However, to potentially get you started, here are some ETFs that might fit the bill if you are looking to diversify your share investments abroad.

Vanguard MSCI Index International Shares ETF (VGS/ASX)

This one buys you a slice of 1505 companies worldwide (excluding Australian companies), of which about 68 per cent are US-based, including Apple, Microsoft, Amazon, Alphabet (Google) and Facebook.

In technical terms, the fund seeks to emulate the returns of the MSCI World ex-Australia Index. MSCI is a US finance and analytics company (formerly Morgan Stanley Capital International), which makes indexes to track things.

VGS comes with an annual management fee of 0.18 per cent, which is higher than ETFs that track the ASX 200 Index (0.07 to 0.13 per cent), but low compared to actively managed ETFs.

“It’s a wonderful, relatively low-cost way to get access to the rest of the developed world’s stock markets, including the US, Canada, UK, Japan, France and Switzerland,” says Scott Phillips, chief investment officer at The Motley Fool.

“In one fell swoop, you have effective part-ownership in companies such as Tesla, Nestle, Sony, AstraZeneca and about 1500 others; high-quality businesses that are worth owning in their own right, while also providing industry, geographic and currency diversification.”

SPDR S&P World ex-Australia ETF (WXOZ/ASX)

This provides you with exposure to more than 1500 of the biggest global companies.

It is managed by State Street Global Advisors and seeks to replicate the returns of a benchmark called the S&P Developed ex-Australia Large-MidCap (AUD) Index, which represents about 85 per cent of the total market capitalisation of global developed markets.

It comes with a slightly higher management fee of 0.3 per cent.

iShares Global 100 ETF (IOO/ASX)

This tracks the companies in the S&P Global 100 index, which the BlackRock website describes as the “100 multinational, blue-chip companies of major importance in global equity markets”.

iShares is owned by BlackRock, the largest indexed fund issuer in the world.

It has a higher management fee at 0.4 per cent but, despite this, is the preferred global shares ETF of Stockspot founder, Chris Brycki, who invests his clients’ money into it, plus an emerging markets ETF, to get full international exposure.

Brycki says IOO’s performance over the past five to six years has beaten that of broader indexed international shares ETFs. Why? Because larger companies (particularly in the US) have tended to outperform.

“In an environment where small caps do better, then some of these more broad-based ones will do better,” he says.

For exposure to a wider range of emerging economies, such as China and India, Brycki says an IOO investment can be complemented with an emerging markets ETF, such as the iShares MSCI Emerging Markets ETF and Vanguard’s Emerging Markets Shares Index Fund.

It is worth noting that no international shares pay you “franked” dividends, like Aussie shares. However, that must be weighed against the benefits of diversification. Brycki also notes that dividends have become a less important source of total returns in recent years – both here and abroad.

It is also worth noting that the three ETFs I have described – VGS, WXOZ and IOO – are all unhedged against currency moves. That means your investment returns will be impacted by movements in the Australian dollar relative to other currencies.

However, that is not necessarily such a bad thing, explains Morningstar’s Matt Wilkinson.

“Unhedged will likely cushion returns over the long term because the AUD/USD often move in the same direction to global growth,” he says.

All three ETFs are also Australian domiciled, meaning you only have to deal with the Australian tax system when investing.

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If you don’t mind some extra paperwork and exposing yourself to the US tax system, you can also invest in some ultra-low-cost, US-domiciled ETFs listed on our exchange. For example, you could buy ASX-listed iShares S&P 500 ETF AUD (IVV/ASX), which tracks the benchmark S&P 500 Index for an ultra-low management fee of just 0.04 per cent. You could add in exposure to the rest of the world by also buying the Vanguard All-World ex-US Shares Index ETF AUD (VEU/ASX), which tracks the MSCI All World ex-US Index for a management fee of just 0.09 per cent.

The good news is that in 2018, IVV changed to be solely domiciled in Australia, meaning no US tax paperwork. However, buying into VEU will require you to fill in a ”W-8BEN” tax form for the US Internal Revenue Service every three years*.

For those interested in ethical investing, iShares also offers a global shares ETF which tracks an index of “ESG Leaders” – iShares Core MSCI World Ex Aus ESG Leaders ETF (IWLD/ASX) – for a pretty low fee of 0.1 per cent. “Basically, an ESG tilt on international investing,” explains Morningstar investment specialist Shani Jayamanne.

Of the more than $100 billion Aussies have poured into ETFs, more than half has gone into investing in international shares. Well worth considering as part of a balanced portfolio.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circ*mstances before making any financial decisions.

You can follow more of Jess’ money adventures on Instagram @moneywithjess and sign up to receive her weekly email newsletter via The Age here or The Sydney Morning Herald here.

*This article has been updated since publication with this paragraph to clarify that in 2018, IVV became solely Australian domiciled.