S&P 500 vs All World ETFs

Hi folks,
I’m a small long term investor so that I put money into ETF in “set-up and forget mentality”:slight_smile: I prefer buying accumulating ETFs, not the ones giving dividends.
I’m in between “all world global funds” and “S&P 500”. Why do people choose S&P 500 over all world Global funds (v.v.)? Because all world contains the companies in S&P500 mostly. Or do you guys buy both with different weights in portfolio? I focused on the lowest cost (TER) in each ETF but I’d like to get your opinions as well. I’m not looking for financial advisor. Just wanna hear your opinions if you were in my shoes to expand my ideas.

I’d appreciate if you’d kindly share your opinions, recommendations.

Additionally, which all world or S&P 500 do you usually go for?

ALL WORLD ETFs in my list.
1- Invesco FTSE All-World UCITS ETF Acc FWRG
2- Vanguard FTSE All-World UCITS ETF (USD) Accumulating VWRP
3- iShares MSCI ACWI UCITS ETF USD (Acc) SSAC
4- L&G Global Equity UCITS ETF LGGG

S&P 500
1- Invesco S&P 500 UCITS ETF SPXP
2- iShares Core S&P 500 UCITS ETF (Acc) CSP1
3- Xtrackers S&P 500 UCITS ETF 2C GBP hedged XDPG
4- Vanguard S&P 500 UCITS ETF (USD) Accumulating VUAG

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I think you’ve covered most of the ETFs worth mentioning. I’d add SPXL, which is the cheapest S&P tracker at 0.03% (the London one rather than the US leveraged one under the same ticker).

I would favour a world ETF over an S&P500 tracker if it was my only holding. I prefer the geographical diversification but some would say many S&P stocks are global in nature any way.

It’s also worth considering MSCI and FTSE developed world ETFs which are cheaper than all-country equivalents at circa 0.12%. I don’t want the added risk, volatility and cost of emerging markets in a core holding even if it does better long term.

I’m in the process of switching from SWLD to SPXL as it’ll slash my costs, but I’m doing so because I already hold various investment trusts covering off the UK, EU, Asia Pacific etc.

Hope that’s helpful!

Edit: I’d strike any hedged ETFs off the list. If it’s a long-term investment, it’s unlikely worth the cost.

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Hedged ETFs can have their place, but I also avoid them.

Two reasons why I think investing without hedging currency conversion is better:

  1. Investing in foreign stocks partially allows to “hedge” long term local inflation risks.

For example, an investor in Argentina that invested in a hedged investment in say a World ETF (in USD) would have maintained value in local argentinian currency, but with their annual inflation over 100% their purchasing power would have collapsed. On the other hand, if the same investor had invested in an unhedged version of the same World ETF investment, he/she would have maintained more purchasing power as their investments in foreign denominated assets and currencies would have not undergone the same inflation and the stock market returns in the long term tend to beat inflation.

They example may not be the best but I hope you get the point.

  1. Lower ETF costs as hedged ETFs tend to be much more expensive in terms of ongoing charges.
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Hi @topher,
Thanks very much for the detailed answer. I really appreciate it.

Hi @EquityInvestor thanks much 4 info m8.

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Probably something to add is that from some research I have come across indicated that it could be interesting to have a domestic bias, say maybe 20-35% in local investments, to off-set the risk of local currency appreciating a lot in the long run. Whereas the bulk, say 60-80% could be in global/overseas stocks to offset local currency long-term inflation risks.

This is not advice, just a research finding I have come across. If you want I can try to see if I find where it came from.

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