Which Is the Better Global ETF, Vanguard's VT or State Street's SPGM?

The Vanguard Total World Stock ETF (NYSEMKT:VT) offers a lower expense ratio and deeper diversification, while the State Street SPDR Portfolio MSCI Global Stock Market ETF (NYSEMKT:SPGM) has recently delivered higher total returns.

Both funds serve as "one-stop shop" solutions for global equity exposure. By tracking broad indexes that include both domestic and international stocks from developed and emerging markets, VT and SPGM allow investors to capture the performance of the entire global stock market in a single trade. This approach reduces the complexity of rebalancing and can help mitigate the risks associated with country-specific economic cycles.

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.

VT is the more affordable option with an expense ratio of 0.06%, compared to 0.09% for its State Street counterpart. In terms of income, SPGM provides a slightly higher payout with a 1.80% trailing-12-month dividend yield.

Performance & risk comparison

What's inside

The Vanguard Total World Stock ETF is designed for deep global diversification, holding 9,773 stocks to mirror the FTSE Global All Cap Index. Its sector allocation leans heavily towards technology at 31%, followed by financial services at 15% and industrials at 11%. Its largest positions include Nvidia (NASDAQ:NVDA) at 4.18%, Apple (NASDAQ:AAPL) at 3.81%, and Microsoft (NASDAQ:MSFT) at 2.83%. This fund, which was launched in 2008, has a trailing-12-month dividend of $2.48 per share.

The State Street SPDR Portfolio MSCI Global Stock Market ETF tracks the MSCI ACWI IMI Index with a portfolio of 2,924 holdings. Its sector exposure is nearly identical to its peer, with technology representing 31%, financial services at 16%, and industrials at 12%. Its top holdings include Nvidia at 4.26%, Apple at 3.79%, and Microsoft at 2.27%. Launched in 2012, this fund has paid $1.54 per share over the trailing 12 months. Both ETFs use these large-cap tech leaders as a core foundation, but the State Street fund concentrates its weight across fewer individual securities.

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

What this means for investors

The Vanguard Total World Stock ETF (VT) and the State Street SPDR Portfolio MSCI Global Stock Market ETF (SPGM) serve as foundational building blocks for an investor’s portfolio. Both deliver stocks from around the world, including U.S. companies. Consequently, these funds are good starting points for the beginning investor, and provide comprehensive holdings to those who want more holistic exposure to global markets.

Which ETF is the better choice depends on a few key factors. SPGM holds significantly fewer stocks than VT because it uses sampling to optimize the fund’s performance. This helped it deliver a higher dividend yield, one-year return, and growth of $1,000 over a five-year period. In exchange, you pay a larger expense ratio.

VT is more representative of global stock markets given the far greater number of holdings. In this fund, you gain exposure to many companies not available in SPGM. It also sports a substantially bigger AUM, which gives VT superior liquidity. Vanguard characterizes this ETF as having the potential for strong returns but high volatility, given the exposure to emerging markets and smaller companies, which are riskier investments.

Ultimately, SPGM is for investors who prefer its sampling approach and are willing to pay more for its strong performance. VT is great for cost-conscious investors who want a fund they can hold for the long term.

Robert Izquierdo has positions in Apple, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Apple, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.