Wednesday, January 20, 2021

Buying The World

“The world is your oyster”.


As the saying goes, it means that there are opportunities abound and you can achieve anything in your life.


In the context of investing, there are opportunities out there, and the only thing for you to do is to take that first step to learn, analyse and finally invest.


For the Bedokian Portfolio, geographical (regions/countries) comes after asset class in terms of the degree of diversification. This meant that you could group your securities according to the type of asset class and then by geography.


However, going out into the world may pose a challenge for some group of investors, especially passive ones and/or those who do not really have the time to carry out analysis. This is where exchange traded funds (ETFs) come useful into the picture.


There are equities ETFs that cover the various regions and countries, their economic state of development, the capitalization size, and the value/growth/dividend categories. ETFs for the U.S. markets? Plenty. ETFs for developed markets? Sure. ETFs for small-cap companies? Definitely. You could do a mix-and-match a la your daily economic rice lunch using ETFs for your portfolio mix, like for example, dedicating your equities portion with Singapore, U.S. and Asia Pacific in 40-40-20 respectively. Or you could maybe consider 40-40-20 in the order of local, developed and emerging markets. Or you could even have 50-50 in U.S. large cap – local market index, or U.S. growth – U.S. value.


Still, if getting too diverse in terms of holdings is daunting, perhaps the next (or final) alternative is to just buy the world, both figuratively and literally in a sense.


Yes, there are securities that cover the world, and there are sub-types of it. All-world developed equities, emerging market equities, global technology equities, international small caps, global dividend, etc.


It may look intimidating, but as with all investing decisions, homework must be done. Good news is that it would be lesser than going through individual companies, sectors or countries.


A good cover-all would be to look for ETFs that track developed and emerging markets, and having a fair representation across all regions/countries, sectors/industries, capitalization and value/growth/dividend. Now this is really diversification to the max.


So, is there an ETF for this? In the strictest sense, none that I know of.


Usually ETFs follow an index and/or an investment theme, and these indices/themes are specific to begin with, e.g., MSCI World Small Cap Index, MSCI World Growth Index, etc. The closest index we can get at replicating the equities of the world is the MSCI ACWI Index, which covers close to 3,000 large and mid-cap constituents in 11 sectors from 23 developed and 27 emerging markets, encompassing around 85% of the global investable equities1


According to my search, there are only four ETFs that uses the MSCI ACWI Index (shown here) and are listed overseas.


If this is not appealing, then we may have to go back one step to look at least probably two ETFs to cover the global equities part (e.g., global value and global growth). There is no hard and fast rule or guide on this as it is dependent on the individual investor’s preference and style.


Even after settled on having one, two or a few global ETFs for your equity portion, the next few steps are necessary in selecting the appropriate ETFs based on other factors like expense ratios, ETF structure, etc. I had covered this in my other post which could help you a bit.


It is a big world out there, and remember, the world is your oyster.



The Bedokian is not invested in any of the MSCI ACWI ETFs.


1 – MSCI ACWI Index (USD). 31 Dec 2020. (accessed 19 Jan 2021)

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