Investors seeking an investment to increase their portfolio's diversification may find that global equity investments are a suitable choice. The Morgan Stanley Capital International's (MSCI) World Index is a widely referenced global equity index. This index represents large- and mid-capitalization stocks across 23 developed markets around the world. It covers about 85% of the free float-adjusted market capitalization in each of its constituent countries. Investing in international equities reduces risk and increases return potential for investors already invested in domestic equities. For investors not invested in equities, global investment funds offer the best of both worlds: domestic and international securities.

The MSCI World Index tracks the performance of investments in the United States and Canada, 16 countries in Europe and the Middle East, and five countries in the Asia-Pacific region. Learn more about three exchange-traded funds (ETFs) that directly track the MSCI World Index or are highly correlated to it.

IShares MSCI World ETF

As of July 6, 2016, the iShares MSCI World ETF (NYSEARCA: URTH) was the only ETF available that directly tracks the MSCI World Index. The fund had over $275 million in assets under management (AUM) and an expense ratio of 0.24%. The fund invested in 1,165 different securities across all of the major equity sectors. Approximately 60% of the fund is invested in the United States, while the top five international countries, comprising 26% of the portfolio are Japan, the United Kingdom, Canada, France and Switzerland. Since the fund's inception in January 2012, its annualized return is 9.71% through May 31, 2016. Yearly returns have ranged from negative 0.64% to 26.66%. Through May 2016, the fund's standard deviation is 11.8%, and when calculated against the Standard and Poor's (S&P) 500 index, its beta is 1.04.

Vanguard Total World Stock ETF

The Vanguard Total World Stock ETF (NYSEARCA: VT) does not directly track the MSCI World Index, but does have a positive correlation to it at 0.97, making it a very accurate proxy for the index. As of July 6, 2016, the fund had $8.3 billion in AUM and an expense ratio of 0.14%, which is 89% less expensive than the average expense ratio of funds holding similar securities. The fund invests in approximately 7,500 different securities worldwide in nearly 50 different countries. About 56% of the portfolio is invested in North America, with the next two most heavily invested regions being Europe and the Pacific, comprising approximately 35% of the portfolio. The fund's inception date is June 24, 2008; since then, it has realized an annualized return of 4.13% through June 30, 2016. Annual returns for the fund have ranged from negative 7.5% to 32.65%. The standard deviation of the fund is 11.7% through June 30, 2016.


The iShares MSCI ACWI ETF (NASDAQ: ACWI) is another fund that does not directly track the MSCI World Index. However, it has a correlation of 0.98 to the MSCI World Index, which makes it another good choice as an investable proxy for the index. The fund has $5.5 billion in AUM as of July 5, 2016 and an expense ratio of 0.33%. This fund invests in over 1,300 different large- and mid-capitalization equities in developed markets, as well as emerging markets. Approximately 52% of the fund is invested in the United States. The top three developed international countries in the portfolio, weighing 16.5%, are Japan, the United Kingdom and Switzerland. China is the sixth-highest-weighted country, and the largest represented emerging market country, at 3.1%. Since the fund's inception in March 2008, the fund has returned 3.45% on an annualized basis, while maintaining a standard deviation of approximately 12% through May 31, 2016. The beta of the fund versus the S&P 500 is 1.06.

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