Passively managed index funds are a popular way for investors to receive steady returns from relatively low-risk investments. As the popularity of index funds has increased, so has the variety of funds. There are now funds covering most investment sectors and asset classes. Most large mutual fund families now have international index funds that follow indexes based on non-U.S. investments. Less common are global funds that combine U.S. investments with international investments. Investors can create the same asset mix by allocating funds between U.S. index funds and international index funds.

Three notable global index mutual funds follow world stock indexes. The three funds all have low costs to investors and have had solid returns compared with the indexes they track. All returns are annualized and based on data for the period ending Dec. 31, 2015.

Vanguard Total World Stock Index Investor Shares

Vanguard's Total World Stock Index fund is designed to give investors exposure to all of the world's common stock markets. The fund has $8.4 billion of assets under management (AUM) as of Dec. 31, 2015. Its portfolio contains more than 7,400 different securities that represent developed and emerging markets.

The fund uses the FTSE Global All Cap Index as a benchmark. The index contains large-, mid- and small-cap companies in a capitalization-weighted index. The weighting factor makes this index highly biased to large-cap U.S. multinational corporations. Nine large U.S. corporations make up 7.05% of the portfolio, and 55.5% of its assets are invested in North America.

Investors in the Total World Stock Index fund benefit from low investment costs. The fund is no-load with no 12b-1 fee and a low expense ratio of 0.27%. The fund has an annualized total return over three years of 7.73% and 6.17% over five years. Investors should not expect very high long-term returns from this broad-based, passively managed fund. The total return over a longer time period should be almost equal to world real economic growth added to the world inflation rate.

Northern Global Sustainability Index Fund

The Northern Global Sustainability Index Fund puts a twist on global index investing by bringing environmental, social and governance (ESG) factors into the decision-making process. The fund uses the MSCI World ESG Index as a performance benchmark. The companies in the index are large- and mid-cap companies that meet standards pertaining to their social responsibility, ethics and treatment of the environment. Fund managers must invest at least 80% of net assets in common stocks included in the index with the goal of equaling the return of the index.

The Global Sustainability Index Fund is a low-cost fund for investors. It is a no-load fund with a low expense ratio of 0.31%. There is a 2% redemption fee, but that only applies to investors who liquidate their investment in less than 30 days. The redemption fee is meant to discourage market-timed trading of the fund's shares.

This Morningstar four-star rated fund has an annualized total return of 9.68% over three years and 7.46% over five years. This appears to be a victory over Vanguard’s non-ESG index fund, but the difference could be attributed to the fact that the MSCI World ESG Index does not include small-cap stocks.

AQR Global Equity Fund Class I

The AQR Global Equity Fund is not an average mutual fund. Individuals must invest a minimum of $5 million. That minimum can drop to $100,000 if the investor has a properly qualified retirement plan. Investors who work with investment advisors that have a relationship with AQR Funds may face lower minimums as set by their financial advisors.

The AQR Global Equity Fund seeks to track the MSCI World Index. The MSCI World Index only includes companies from developed markets and does not provide any exposure to emerging markets. The portfolio managers are not restricted to investing in common stock; they can make extensive investments in derivatives. Nine of the top 10 holdings, as of Nov. 30, 2015, were various stock market index futures that represented 23.69% of the fund's net assets. This is hedge fund-style trading within a mutual fund.

Despite the riskier trading strategy, this no-load fund receives a Morningstar rating of four stars. The fund has an expense ratio of 0.9% and annualized total returns of 10.85% over three years and 8.62% over five years. Investors should seriously consider whether the extra return is worth the extra risk.

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