I can't choose between world FTSE and MSCI

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Topic Author
Astones
Posts: 322
Joined: Mon Apr 12, 2021 12:48 pm

I can't choose between world FTSE and MSCI

Post by Astones »

I have finally reduced my dilemma to two options.

Vanguard all world FTSE (acc)

Or

IShares world + iShares EM (both acc)

And then there is the question on whether adding iShares world small cap.

If I make it a matter of simplicity I should just go for V, but if I'm looking for proper diversification the three iShares offer the closest combo I could get to a total world market, and including small cap in a portfolio is generally considered wise for young investors.

I'm torn.
imperia
Posts: 224
Joined: Tue Feb 21, 2017 6:31 am

Re: I can't choose between world FTSE and MSCI

Post by imperia »

MSCI or FTSE the return Will be the same +-0.5%.
Time Will tell,...
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galeno
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Re: I can't choose between world FTSE and MSCI

Post by galeno »

KISS & STC. Use one fund.

It's easier and cheaper. The 2 fund combo LOOKS cheaper. But as soon as you rebalance them (and you will) the savings go "poof".
KISS & STC.
mohd
Posts: 85
Joined: Wed Jul 22, 2020 2:10 am
Location: Bahrain

Re: I can't choose between world FTSE and MSCI

Post by mohd »

I was in the same boat, I wasn't sure whether to choose FTSE or MSCI.
I ended up choosing FTSE to get exposure to countries like China

The difference between them is not really huge or (noticeable)
In some years FTSE overcomes MSCI and in some years it's the opposite.

Basically, you have to decide whether you want to get exposure to these countries or not in order to choose which one to hold.

Take a look into this topic, it's great to help you decide
https://investmentmoats.com/passive-inv ... fferences/
Topic Author
Astones
Posts: 322
Joined: Mon Apr 12, 2021 12:48 pm

Re: I can't choose between world FTSE and MSCI

Post by Astones »

mohd wrote: Sun May 09, 2021 8:18 am I was in the same boat, I wasn't sure whether to choose FTSE or MSCI.
I ended up choosing FTSE to get exposure to countries like China

The difference between them is not really huge or (noticeable)
In some years FTSE overcomes MSCI and in some years it's the opposite.

Basically, you have to decide whether you want to get exposure to these countries or not in order to choose which one to hold.

Take a look into this topic, it's great to help you decide
https://investmentmoats.com/passive-inv ... fferences/
Thanks.
In order to compare apples with apples, we need to add iShares MSCI emerging markets to the MSCI world. Otherwise we're comparing a developed country ETF with an all world ETF.
mohd
Posts: 85
Joined: Wed Jul 22, 2020 2:10 am
Location: Bahrain

Re: I can't choose between world FTSE and MSCI

Post by mohd »

Astones wrote: Sun May 09, 2021 9:51 am
mohd wrote: Sun May 09, 2021 8:18 am I was in the same boat, I wasn't sure whether to choose FTSE or MSCI.
I ended up choosing FTSE to get exposure to countries like China

The difference between them is not really huge or (noticeable)
In some years FTSE overcomes MSCI and in some years it's the opposite.

Basically, you have to decide whether you want to get exposure to these countries or not in order to choose which one to hold.

Take a look into this topic, it's great to help you decide
https://investmentmoats.com/passive-inv ... fferences/
Thanks.
In order to compare apples with apples, we need to add iShares MSCI emerging markets to the MSCI world. Otherwise we're comparing a developed country ETF with an all world ETF.
Oh I missed EM on your post, my bad

Anyway, in term of performance both of the options will give you almost if not same performance. Perhaps FTSE will give you a slightly better performance because you will save a bit cost from rebalancing, but that difference is not huge? So I would say both have same performance.

So, now it comes to simplicity and flexibility

The one fund ETF has better simplicity in terms of distribution and rebalancing. The other two funds have more flexibility in terms of changing the weight % between the two funds.

The questions that I would ask here before selecting funds:
1. Do you prefer simplicity over flexibility?
2. Would you ever change the weighting of emerging to add or remove more %?

For me it's 1. Yes 2. No. I don't wanna bother with rebalancing and calculating how much should go to each fund. So I go to FTSE all world option.
Topic Author
Astones
Posts: 322
Joined: Mon Apr 12, 2021 12:48 pm

Re: I can't choose between world FTSE and MSCI

Post by Astones »

mohd wrote: Sun May 09, 2021 11:07 am
For me it's 1. Yes 2. No. I don't wanna bother with rebalancing and calculating how much should go to each fund. So I go to FTSE all world option.
These are fair points.

So, the best solution for Americans is VT, that has companies from everywhere of large, medium, and small cap for a total of about 9k holdings. Vanguard FTSE is a compromise for Europeans, with about 3500 holdings of large and medium cap. Then, if we really want to hold the whole market, an addition is required to add small cap and get a bit closer to the VT etf.
Many people believe that the change would be insignificant, and perhaps they're right. I dunno.
Dragan
Posts: 2
Joined: Sun May 09, 2021 5:42 am

Re: I can't choose between world FTSE and MSCI

Post by Dragan »

mohd wrote: Sun May 09, 2021 11:07 am
Astones wrote: Sun May 09, 2021 9:51 am
mohd wrote: Sun May 09, 2021 8:18 am I was in the same boat, I wasn't sure whether to choose FTSE or MSCI.
I ended up choosing FTSE to get exposure to countries like China

The difference between them is not really huge or (noticeable)
In some years FTSE overcomes MSCI and in some years it's the opposite.

Basically, you have to decide whether you want to get exposure to these countries or not in order to choose which one to hold.

Take a look into this topic, it's great to help you decide
https://investmentmoats.com/passive-inv ... fferences/
Thanks.
In order to compare apples with apples, we need to add iShares MSCI emerging markets to the MSCI world. Otherwise we're comparing a developed country ETF with an all world ETF.
Oh I missed EM on your post, my bad

Anyway, in term of performance both of the options will give you almost if not same performance. Perhaps FTSE will give you a slightly better performance because you will save a bit cost from rebalancing, but that difference is not huge? So I would say both have same performance.

So, now it comes to simplicity and flexibility

The one fund ETF has better simplicity in terms of distribution and rebalancing. The other two funds have more flexibility in terms of changing the weight % between the two funds.

The questions that I would ask here before selecting funds:
1. Do you prefer simplicity over flexibility?
2. Would you ever change the weighting of emerging to add or remove more %?

For me it's 1. Yes 2. No. I don't wanna bother with rebalancing and calculating how much should go to each fund. So I go to FTSE all world option.
Why not buy 2 (or 3) funds and just not do any rebalancing? That would be equivalent to buying only 1 fund.
Betelgeuse79
Posts: 60
Joined: Sat Mar 07, 2020 3:25 am

Re: I can't choose between world FTSE and MSCI

Post by Betelgeuse79 »

Vanguard has recently launched a new All World ESG ETF which also includes small caps https://www.justetf.com/en/etf-profile. ... 00BNG8L278

I don't know if ESG is something you are interested (this Vanguard ETF employs really loose exclusionary criteria), but it holds thousands of securities from both developed and emerging markets and it's an interesting alternative to a combination of three iShares ETFs for developed, emerging, and small caps.
Topic Author
Astones
Posts: 322
Joined: Mon Apr 12, 2021 12:48 pm

Re: I can't choose between world FTSE and MSCI

Post by Astones »

Betelgeuse79 wrote: Sun May 09, 2021 11:42 pm Vanguard has recently launched a new All World ESG ETF which also includes small caps https://www.justetf.com/en/etf-profile. ... 00BNG8L278

I don't know if ESG is something you are interested (this Vanguard ETF employs really loose exclusionary criteria), but it holds thousands of securities from both developed and emerging markets and it's an interesting alternative to a combination of three iShares ETFs for developed, emerging, and small caps.
Thank you I'll check it out!
mohd
Posts: 85
Joined: Wed Jul 22, 2020 2:10 am
Location: Bahrain

Re: I can't choose between world FTSE and MSCI

Post by mohd »

Dragan wrote: Sun May 09, 2021 8:49 pm
mohd wrote: Sun May 09, 2021 11:07 am
Astones wrote: Sun May 09, 2021 9:51 am
mohd wrote: Sun May 09, 2021 8:18 am I was in the same boat, I wasn't sure whether to choose FTSE or MSCI.
I ended up choosing FTSE to get exposure to countries like China

The difference between them is not really huge or (noticeable)
In some years FTSE overcomes MSCI and in some years it's the opposite.

Basically, you have to decide whether you want to get exposure to these countries or not in order to choose which one to hold.

Take a look into this topic, it's great to help you decide
https://investmentmoats.com/passive-inv ... fferences/
Thanks.
In order to compare apples with apples, we need to add iShares MSCI emerging markets to the MSCI world. Otherwise we're comparing a developed country ETF with an all world ETF.
Oh I missed EM on your post, my bad

Anyway, in term of performance both of the options will give you almost if not same performance. Perhaps FTSE will give you a slightly better performance because you will save a bit cost from rebalancing, but that difference is not huge? So I would say both have same performance.

So, now it comes to simplicity and flexibility

The one fund ETF has better simplicity in terms of distribution and rebalancing. The other two funds have more flexibility in terms of changing the weight % between the two funds.

The questions that I would ask here before selecting funds:
1. Do you prefer simplicity over flexibility?
2. Would you ever change the weighting of emerging to add or remove more %?

For me it's 1. Yes 2. No. I don't wanna bother with rebalancing and calculating how much should go to each fund. So I go to FTSE all world option.
Why not buy 2 (or 3) funds and just not do any rebalancing? That would be equivalent to buying only 1 fund.
Technically it's not the same.

Holdings under a fund are automatically rebalanced by the vendor on a frequent basis (mostly quarterly)
for instance, VWRA ETF might hold 87% in the developed market and 13% in the emerging market. After some years this percent might not remain the same.
Ramjet
Posts: 947
Joined: Thu Feb 06, 2020 11:45 am
Location: Ohio

Re: I can't choose between world FTSE and MSCI

Post by Ramjet »

Another all world index with similar costs to VT is SPGM
VT & HFEA
Genghis
Posts: 70
Joined: Fri Jun 26, 2020 6:53 am

Re: I can't choose between world FTSE and MSCI

Post by Genghis »

mohd wrote: Mon May 10, 2021 7:24 am
Dragan wrote: Sun May 09, 2021 8:49 pm
mohd wrote: Sun May 09, 2021 11:07 am
Astones wrote: Sun May 09, 2021 9:51 am
mohd wrote: Sun May 09, 2021 8:18 am I was in the same boat, I wasn't sure whether to choose FTSE or MSCI.
I ended up choosing FTSE to get exposure to countries like China

The difference between them is not really huge or (noticeable)
In some years FTSE overcomes MSCI and in some years it's the opposite.

Basically, you have to decide whether you want to get exposure to these countries or not in order to choose which one to hold.

Take a look into this topic, it's great to help you decide
https://investmentmoats.com/passive-inv ... fferences/
Thanks.
In order to compare apples with apples, we need to add iShares MSCI emerging markets to the MSCI world. Otherwise we're comparing a developed country ETF with an all world ETF.
Oh I missed EM on your post, my bad

Anyway, in term of performance both of the options will give you almost if not same performance. Perhaps FTSE will give you a slightly better performance because you will save a bit cost from rebalancing, but that difference is not huge? So I would say both have same performance.

So, now it comes to simplicity and flexibility

The one fund ETF has better simplicity in terms of distribution and rebalancing. The other two funds have more flexibility in terms of changing the weight % between the two funds.

The questions that I would ask here before selecting funds:
1. Do you prefer simplicity over flexibility?
2. Would you ever change the weighting of emerging to add or remove more %?

For me it's 1. Yes 2. No. I don't wanna bother with rebalancing and calculating how much should go to each fund. So I go to FTSE all world option.
Why not buy 2 (or 3) funds and just not do any rebalancing? That would be equivalent to buying only 1 fund.
Technically it's not the same.

Holdings under a fund are automatically rebalanced by the vendor on a frequent basis (mostly quarterly)
for instance, VWRA ETF might hold 87% in the developed market and 13% in the emerging market. After some years this percent might not remain the same.
I buy a developed world etf and an emerging markets etf. I amend the allocation to the proportions of FTSE All World and buy towards the start of the month. The two ETFs then move in parallel (more or less) to VWRL.
Topic Author
Astones
Posts: 322
Joined: Mon Apr 12, 2021 12:48 pm

Re: I can't choose between world FTSE and MSCI

Post by Astones »

Genghis wrote: Mon May 10, 2021 7:37 am I buy a developed world etf and an emerging markets etf. I amend the allocation to the proportions of FTSE All World and buy towards the start of the month. The two ETFs then move in parallel (more or less) to VWRL.
Well, the spirit behind splitting EM and developed is just that.
Every time you're about to make an adjustment, you check the market cap of the two assets and buy in such a way that your weights get as close as possible.

This is what I would do with the 3 iShares (developed + EM + small cap).

The advantages with respect to VWRL is that you pay slightly smaller fees and you have more holdings, so larger diversification.

I think that with the 3 iShares you get to more than 7k holdings. Not yet the >9k of VT though, because you have no EM small cap, but the difference should be minimal.
Dragan
Posts: 2
Joined: Sun May 09, 2021 5:42 am

Re: I can't choose between world FTSE and MSCI

Post by Dragan »

Astones wrote: Mon May 10, 2021 9:32 am
Genghis wrote: Mon May 10, 2021 7:37 am I buy a developed world etf and an emerging markets etf. I amend the allocation to the proportions of FTSE All World and buy towards the start of the month. The two ETFs then move in parallel (more or less) to VWRL.
Well, the spirit behind splitting EM and developed is just that.
Every time you're about to make an adjustment, you check the market cap of the two assets and buy in such a way that your weights get as close as possible.

This is what I would do with the 3 iShares (developed + EM + small cap).

The advantages with respect to VWRL is that you pay slightly smaller fees and you have more holdings, so larger diversification.

I think that with the 3 iShares you get to more than 7k holdings. Not yet the >9k of VT though, because you have no EM small cap, but the difference should be minimal.
But why would you need to make any adjustments after the initial buy in? The proportion of EM in the VWRL will automatically change according to market cap, and so will the size of your EM fund in the 3-way buy in.
Topic Author
Astones
Posts: 322
Joined: Mon Apr 12, 2021 12:48 pm

Re: I can't choose between world FTSE and MSCI

Post by Astones »

Dragan wrote: Mon May 10, 2021 10:12 am But why would you need to make any adjustments after the initial buy in? The proportion of EM in the VWRL will automatically change according to market cap, and so will the size of your EM fund in the 3-way buy in.
Let me give you an example.

When the market cap of a given index increases because a new company is added to the index, you don't see this increase materialize in your ETF (since it's not due to the growth of the companies you already own, but to the purchase of a new company).
Imagine the example in which you have two funds, A and B, and someone else has a single fund C=A+B.
The new company is added to B. The guy with C will sell a little bit of everything from A and B in order to buy the company proportionally to the market cap. In your case, only companies of B will be sold. So you can see that the addition of this company has provoked a mismatch between the weights of A and B taken separately with respect of A and B when they are together inside C.

EM has a larger turnover with respect to developed, so it is likely that there will be deviations of similar kind in the ETF weights over the long run.
mohd
Posts: 85
Joined: Wed Jul 22, 2020 2:10 am
Location: Bahrain

Re: I can't choose between world FTSE and MSCI

Post by mohd »

Astones wrote: Mon May 10, 2021 9:32 am
Genghis wrote: Mon May 10, 2021 7:37 am I buy a developed world etf and an emerging markets etf. I amend the allocation to the proportions of FTSE All World and buy towards the start of the month. The two ETFs then move in parallel (more or less) to VWRL.
Well, the spirit behind splitting EM and developed is just that.
Every time you're about to make an adjustment, you check the market cap of the two assets and buy in such a way that your weights get as close as possible.

This is what I would do with the 3 iShares (developed + EM + small cap).

The advantages with respect to VWRL is that you pay slightly smaller fees and you have more holdings, so larger diversification.

I think that with the 3 iShares you get to more than 7k holdings. Not yet the >9k of VT though, because you have no EM small cap, but the difference should be minimal.
This is exactly why I prefer the one fund ETF, I just simply buy the amount of shares I want and forget about it. I don't have to do any calculation or an extra effort - how lazy I am!
Topic Author
Astones
Posts: 322
Joined: Mon Apr 12, 2021 12:48 pm

Re: I can't choose between world FTSE and MSCI

Post by Astones »

mohd wrote: Mon May 10, 2021 11:00 am
Astones wrote: Mon May 10, 2021 9:32 am
Genghis wrote: Mon May 10, 2021 7:37 am I buy a developed world etf and an emerging markets etf. I amend the allocation to the proportions of FTSE All World and buy towards the start of the month. The two ETFs then move in parallel (more or less) to VWRL.
Well, the spirit behind splitting EM and developed is just that.
Every time you're about to make an adjustment, you check the market cap of the two assets and buy in such a way that your weights get as close as possible.

This is what I would do with the 3 iShares (developed + EM + small cap).

The advantages with respect to VWRL is that you pay slightly smaller fees and you have more holdings, so larger diversification.

I think that with the 3 iShares you get to more than 7k holdings. Not yet the >9k of VT though, because you have no EM small cap, but the difference should be minimal.
This is exactly why I prefer the one fund ETF, I just simply buy the amount of shares I want and forget about it. I don't have to do any calculation or an extra effort - how lazy I am!
I am very tempted to go that road. The difference in return is likely going to be small.
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