Antoine Bouvy
16 May 2025
World ETF: a good choice to diversify your portfolio
In a globalized and sometimes uncertain economic environment, diversifying your portfolio has become essential for any investor focused on long-term returns. One of the simplest and most effective ways to achieve this is by investing in a World ETF. This type of exchange-traded fund offers access, in a single transaction, to thousands of companies across developed markets. Low-cost, high-performing, and easy to understand, World ETFs are increasingly appealing to both individual and professional investors. In this article, we’ll break down how they work, their advantages, and why Easyvest has made them a cornerstone of its investment strategy.
What is a world ETF?
Definition and how it works
A tracker, also called an ETF or exchange traded fund, is a stock market-listed investment fund that aims to replicate the performance of a benchmark index. Unlike actively managed funds where a manager selects securities based on forecasts, an ETF passively follows a predetermined basket of assets. This approach significantly reduces management fees while ensuring faithful exposure to market movements.
A world ETF specifically aims to replicate a global index. That is, one made up of shares from companies listed across several developed, and in some cases, emerging markets. It is therefore an ideal tool to gain broad access to the global economy through a single product. These indices typically include large- and mid-cap companies across various economic sectors and geographic regions.
There is no single world ETF, but several variants offered by different providers. Two index providers dominate the market:
- MSCI (with its well-known MSCI World and MSCI ACWI)
- FTSE (notably the FTSE All-World)
Each applies its own inclusion, weighting, and rebalancing criteria, which explains the differences in composition and performance among ETFs tracking these indices. Asset managers like iShares, Vanguard, Amundi, and Lyxor offer these ETFs on major brokerage platforms.
See also ETF: understand everything to invest better
What assets make up a world ETF?
A world ETF offers broad diversification both geographically and across sectors. For instance, the MSCI World Index includes over 1,300 companies from 23 developed countries. U.S. companies are heavily represented (often over 60%), followed by Japan, the United Kingdom, France, and Germany. Sector-wise, these ETFs cover various areas such as technology, healthcare, industry, consumer goods, and finance. This composition ensures balanced exposure to the global economy while minimizing risks specific to a sector or region.
source: MSCI factsheet
Some world ETFs, like those tracking the FTSE All-World Index, go even further by also including emerging markets. This index comprises approximately 4,000 companies across more than 45 countries, covering about 90 to 95% of the investable global market capitalization. It encompasses the same major geographic areas as the MSCI World, with additional exposure to countries like China, India, and Brazil. This allows for even greater diversification while adhering to a long-term global investment strategy.
Why invest in a world ETF?
Optimal global diversification
One of the main strengths of a world ETF is its ability to diversify your portfolio on a global scale. By investing in a single product, you gain access to hundreds of companies from different countries and sectors. This diversification reduces the risk associated with the performance of a single company or market. For example, if the European economy slows down, growth in the U.S. or Asia can offset this decline. This approach also helps to smooth returns over the long term.
Key benefits of this global diversification:
- Reduction of geographic and sector-specific risk
- Instant access to global economic leaders
- Enhanced resilience to local crises
See also “Global market vs Bel 20”
Simplicity and efficiency
The world ETF stands out for its ease of use. A single line in your portfolio covers the majority of developed markets, eliminating the complexity of selecting multiple regional or sector-specific ETFs. Additionally, passive management reduces annual fees (often below 0.3%), which improves net performance. ETFs are also highly liquid, allowing you to buy or sell shares at any time during market hours.
In summary, investing in a world ETF means:
- Simplifying portfolio construction
- Significantly reducing management fees
- Avoiding selection biases and human errors
- Benefiting from transparent and automated management
Performance and risks of a world ETF
Historical performance
Historically, world ETFs have shown strong performance, often outperforming savings accounts or government bonds. In comparison, actively managed funds often struggle to beat this index over the long term, mainly due to their higher fees. A world ETF is therefore a solid foundation for building a high-performing portfolio.
You can visualize these returns over time using our interactive tool, which allows you to simulate the evolution of a portfolio based on the MSCI World Index. This tool provides a clear, personalized view of the potential growth of your investment depending on various time horizons, risk profiles, and investment amounts.
Risks to be aware of
Investing in a world ETF is not without risks. The main one is the inherent volatility of stock markets. During crises—such as in 2008 or 2020—global indices can undergo significant corrections. Another risk relates to exchange rates: most world ETFs are denominated in U.S. dollars, exposing European investors to currency fluctuations. However, these risks can be mitigated through a long-term investment strategy and proper asset allocation.
Key things to keep in mind:
- The value of a world ETF can fluctuate sharply in the short term
- Foreign currencies may affect performance if the ETF is not hedged
- A long-term approach is essential to absorb volatility
World ETF vs S&P 500, Nasdaq, or emerging markets ETFs
A World ETF, like one based on the MSCI World index, gives you access to a basket of more than 1,500 stocks spread across 23 developed countries. This geographical and sectoral diversity makes it a robust diversification tool, even though the index remains dominated by the United States. This means you benefit from strong exposure to the American economy, while also including other major economic powers such as Japan, the United Kingdom, and Germany.
In contrast, an ETF based on the S&P 500 focuses its investments solely on the 500 largest American companies. That means exposure to a single currency (the dollar), a single economy, and a unique tax and regulatory environment. This type of ETF is therefore more concentrated and potentially more volatile in the event of a shock specifically affecting the United States.
In summary:
- The World ETF offers international diversification, reducing the risks linked to one country or a specific geographical area.
- The S&P 500 provides concentration in the American market, with strong growth potential, but narrower exposure.
The choice between these two ETFs will depend on your risk profile:
- If you favor relative stability and want to spread your capital across multiple economies, the World ETF will be more suitable.
- On the other hand, with the S&P 500, you will have more concentrated exposure in exchange for potentially higher performance—but also significantly higher risk.
As for the Nasdaq, exposure is even more concentrated, mainly oriented toward tech giants like Apple, Amazon, or Meta. It can generate impressive returns, but at the cost of marked volatility.
Finally, emerging markets ETFs, such as those replicating the MSCI Emerging Markets index, offer significant growth potential but also expose the investor to greater risks: political instability, currency risk, governance, and sometimes uncertain regulation. They can therefore complement a diversified portfolio, but are rarely recommended as a primary base.
The Easyvest approach: a portfolio based on the world ETF
At Easyvest, we have chosen to make the world ETF the cornerstone of our investment strategy. This approach is based on a key principle: broad, international diversification is one of the best ways to limit risks without sacrificing long-term performance potential. By spreading your capital across many developed economies, you reduce the impact of regional crises, sector tensions, or cyclical slowdowns.
This diversification also helps reduce overall portfolio volatility, a crucial factor in preserving your peace of mind as an investor. Less subject to extreme fluctuations, a well-diversified portfolio allows you to get through tough market phases without being tempted to exit at the wrong time. It is this stability that fosters steady growth of your capital over time.
How Easyvest builds a portfolio around the world ETF
Our portfolios are designed to match your risk profile precisely, based on your goals, investment horizon, and tolerance for fluctuations. The world ETF plays a central role, offering global exposure to equity markets. To balance this dynamic component, we add bond ETFs, which provide a layer of stability and reduce the portfolio’s overall volatility.
We perform automatic rebalancing to continuously maintain the target allocation between stocks and bonds—without any action required on your part and without additional fees. This mechanism gradually corrects the imbalances caused by market movements, while ensuring you follow a disciplined investment strategy.
Finally, you can always count on guidance from an Easyvest advisor. They are there to adjust your strategy based on your personal situation, answer your questions, and help you make the right choices at every step of your investment journey.
Conclusion
A world ETF is a simple, efficient investment solution perfectly suited to a long-term strategy. Thanks to its geographic and sector diversification, it helps smooth out performance, reduce specific risks, and access the growth of the world’s major economies. It’s an excellent starting point—or a solid foundation—for building a robust portfolio.
Investing in a world ETF means:
- Accessing thousands of companies worldwide in a single transaction
- Reducing risks related to overexposure to one country or sector
- Minimizing costs through transparent, passive management
- Simplifying your portfolio management with a single, liquid product
- Committing to a long-term approach suitable for all investor profiles
At Easyvest, we firmly believe that the world ETF should be the foundation of any effective portfolio. r.
FAQ on world ETFs
What is the best world ETF?
There is no universally “best” ETF, as the choice always depends on your investor profile, your preferences, and the investment platform you use. That said, some world ETFs stand out for their low cost, high liquidity, and the quality of their index replication.
Here are a few widely acclaimed options:
- iShares Core MSCI World (IWDA): managed by BlackRock, very popular, 0.20% fee, physical replication, available in both accumulating and distributing versions.
- Amundi MSCI World: listed in euros, easily accessible for European investors, competitive fees around 0.18%, a good alternative on French platforms.
- Vanguard FTSE All-World: includes both developed and emerging markets, fees around 0.22%, excellent global coverage for a diversified investor.
To choose the right ETF, take into account:
- The trading currency (USD or EUR)
- The type of replication (physical or synthetic)
- Whether it accumulates or distributes dividends
- Whether it includes currency hedging, if you want protection against euro-dollar fluctuations
Ultimately, the “best” ETF is the one that best matches your financial goals, your tax situation, and your investment horizon.
Is there a total world ETF?
Yes, there are ETFs that aim to cover the entire investable global stock market, including both developed and emerging economies. These are often referred to as total world ETFs.
A key example is the Vanguard FTSE All-World ETF, which replicates the FTSE All-World Index. This index includes approximately 4,000 companies from over 45 countries and covers about 90–95% of global investable market capitalization.
This type of ETF offers:
- Exposure to both developed and emerging markets
- Broad geographic and sector diversification
- A simple, single-product solution to invest in most of the global economy
It’s an excellent choice for investors seeking maximum diversification through a total world approach.