Vanguard Total World vs iShares MSCI World: Which Global ETF Delivers Better Value

The Vanguard Total World Stock ETF (NYSEMKT:VT) provides broader diversification into emerging markets at a lower cost, while the iShares MSCI World ETF (NYSEMKT:URTH) focuses exclusively on developed economies.

Investors looking to capture global economic growth often weigh these two diversified powerhouses. While both funds hold thousands of stocks, they differ significantly in their geographic scope, total number of holdings, and ongoing management costs. This comparison examines whether the more expansive Vanguard fund or the developed-market-focused iShares fund better serves a long-term investment strategy.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield as of June 26.

Cost is a primary differentiator for long-term holders, as the Vanguard fund is four times more affordable than its iShares counterpart. Furthermore, the Vanguard fund offers a higher payout, providing a 1.59% yield compared to 1.34% for the iShares fund.

Performance & risk comparison

What's inside

Vanguard Total World Stock ETF tracks the FTSE Global All Cap Index, providing broad exposure to businesses across developed and emerging markets. With a massive portfolio of 10,024 holdings, it captures a broader segment of the global market than most peers, including small-capitalization companies. Its largest positions include Nvidia Corp (NASDAQ:NVDA) at 4.2%, Apple Inc (NASDAQ:AAPL) at 3.82%, and Microsoft Corp (NASDAQ:MSFT) at 2.84%. The fund traded between $123.85 and $158.84 over the last year and, as of June manages ~$95.3 billion in assets under management (AUM). Launched in 2008, it maintains a sector focus on technology at 31.1%, financial services at 15.2%, and industrials at 11.4%, and offers a trailing 12-month dividend of $2.48 per share.

iShares MSCI World ETF provides a more concentrated experience by focusing exclusively on stocks from developed global economies. It excludes emerging markets entirely and holds 1,309 companies that meet the MSCI World Index criteria. Its top holdings include Nvidia at 5.4%, Apple at 5.1%, and Microsoft at 3.5%. Its 52-week price range spanned $163.38 to $204.96. Launched in 2012, its sector weights lean toward technology at 31.3%, financial services at 15%, and industrials at 10.9%. The fund paid $2.84 per share over the trailing 12 months. While it has a smaller AUM of ~$7.9 billion, it has delivered higher five-year total growth than the broader Vanguard fund.

Which fund is the better buy?

While these two funds offer global coverage, one is more global than the other.

The Vanguard Total World Stock ETF is just that: it offers coverage of the full world of equity markets, including emerging markets, which should be the faster-growing compared to developed-world peers. With more than 10,000 holdings, it is about as comprehensive a global stock fund as one can find.

The iShares MSCI World ETF excludes the developing world, as we noted earlier, which means the fund is more concentrated in U.S. stocks than the Vanguard. URTH has about 71% of its portfolio in the U.S. compared to about 62% for VT. That means if you are looking for diversification outside the U.S., you’re not getting as much with iShares. On the plus side, that means the iShares fund is less volatile, as seen by its lower maximum drawdown compared to the Vanguard offering.

The differentiator here is long-term performance: URTH bests VT across multiple time frames, including 3-year (17.1% vs. 16.9% for VT), 5-year (10.5% vs. 9.5%), and 10-year (12.1% vs. 11.5%).

While these aren’t quite apples-to-apples funds, long-term performance is a telling sign of a good ETF. Both are good, but in this case, the iShares MSCI World ETF is the better buy.

For more guidance on ETF investing, check out the full guide at this link.

Brendan Coffey has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.