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. As a result, there are now funds covering most investment sectors and asset classes. In fact, most mutual fund families now have global index funds that follow indexes based on foreign and 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 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.

Vanguard Total World Stock Index Fund Admiral Shares (VTWAX)

The Vanguard Total World Stock Index Fund Admiral Shares is designed to give investors exposure to all of the world's common stock markets. As of July 21, 2020, the fund held $19.6 billion in assets covering 8,734 securities in developed and emerging markets.

The fund seeks to track the performance of the FTSE Global All Cap Index. The index is made up of large-, mid- and small-cap stocks from around the world. Approximately 47 countries are represented, including both developed and emerging markets. The top 10 holdings make up 14.5% of its total assets, led by technology companies such as Microsoft (MSFT), Apple (AAPL), Amazon (AMZN), Facebook (FB) and Alphabet (GOOG).

Investors in the Total World Stock Index fund benefit from low investment costs, with an expense ratio of 0.1%. The fund has a one-year return of 7.07% and a 10.19% return since inception. 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 (NSRIX)

The Northern Global Sustainability Index Fund puts a twist on global index investing by bringing environmental, social and governance (ESG) criteria into the decision-making process. The fund uses the MSCI World ESG Leaders Index as a performance benchmark. The 761 companies in the index are large- and mid-cap companies that meet standards pertaining to their social responsibility, ethics and treatment of the environment.

The Global Sustainability Index Fund is a low-cost fund for investors. It is a no-load fund with a low expense ratio of 0.3%. 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.

As of June 20, 2020, this Morningstar four-star rated fund has an annualized total return of 7.53% over three years and 7.37% 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 (AQGIX)

The AQR Global Equity Fund is not an average mutual fund. Individuals must invest a minimum of $5 million. 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 outperform 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 from investing in common stock; they can make extensive investments in derivatives. The fund is active, with a high expense ratio of 0.81% managing the $316 million in assets in the fund. In fact, the top 10 holdings made up about 20% of the assets in the portfolio, including tech staples like Apple, Microsoft and Amazon as well as others such as Swiss healthcare company Roche Holding AG and Dutch food retailer Ahold Delhaize. This is hedge fund-style trading within a mutual fund.

Despite the riskier trading strategy—the fund also has 122% turnover—this no-load fund has a Morningstar rating of three stars. As of July 21, 2020, the fund had annualized total returns of 8.8% over 10 years and 5.2% over five years. Investors should seriously consider whether the extra return is worth the extra risk.