When it comes to global fund investments, there are over 500 investment options on the internet. Moreover, when we look at user comments and long-term returns, it would not be wrong to say that most of these funds are successful. Nevertheless, before making such a choice, it would be more logical to get support from well-established and proven addresses.
There are many options available to investors when they are interested in global funds. Two popular options are the Vanguard Total World Stock ETF (VT) and the Vanguard Total World Stock Index Fund Admiral Shares (VTWAX). While both funds aim to provide investors with exposure to the global stock market, they have some important differences that investors should be aware of. This article compares the two funds to help investors decide which fund is more suitable for their portfolio objectives.
Information About VT vs VTWAX
In our research for you, we tried to answer common questions and make a simple comparison between Vanguard Total World Stock ETF (VT) and Vanguard Total World Stock Index Fund Admiral Shares (VTWAX). Let’s get started…
VT is an ETF designed to track the performance of the FTSE Global All Cap Index. It is popular with investors with an expense ratio of 0.08% and assets under management (AUM) of $28.2 billion as of September 2021.
VTWAX is a mutual fund that aims to track the performance of the FTSE Global All Cap Index. Its expense ratio is slightly higher at 0.10%, and as of September 2021, it has $1.2 trillion in total assets under management.
What Are The Differences in Performance?
When evaluating the historical performance of VT and VTWAX, it’s important to consider their returns, risk and volatility. Over the last five years, VT has slightly outperformed VTWAX with an average annualized return of 14.21% compared to 14.17% for VTWAX. However, VTWAX has slightly lower volatility due to larger assets under management.
Since VT and VTWAX share the same objective and track the same index, their assets are identical. Both funds hold more than 8,000 stocks from developed and emerging markets worldwide, giving investors a broad overview of the global equity market. The main holdings of both funds include well-known companies such as Apple, Microsoft, Amazon and Facebook.
Both VT and VTWAX are managed by Vanguard and track the same index, resulting in almost identical management teams. However, the differences in fees are due to the fact that VT is an ETF while VTWAX is a mutual fund. VT has a lower expense ratio of 0.08%, while VTWAX has an expense ratio of 0.10%. In addition, mutual funds may be subject to additional fees, such as front-end loads, which can increase the total cost.
How To Choose Funds Based On Market Conditions?
The performance of VT and VTWAX depends on various market conditions. Factors such as the COVID-19 pandemic, geopolitical tensions, and changes in global trade policies can affect the performance of these funds.
Currently, the global economy is recovering from the downturn caused by the pandemic and central banks around the world are pursuing accommodative monetary policies to support growth. However, inflation fears and rising interest rates pose risks to global markets and these funds.
What To Know About Investment Considerations
Investors should consider several factors when choosing between VT and VTWAX, including investment objectives, risk tolerance and overall portfolio allocation. Although both funds offer broad global exposure, there are differences in their holdings and allocation strategies.
Investors looking for a low-cost, diversified global fund may prefer VT due to its lower expense ratio and exposure to the broader market sector. On the other hand, investors seeking greater exposure to US equities and potentially higher returns may prefer VTWAX.
It is also very important to consider the potential risks and rewards of investing in each fund. While both funds offer diversification benefits, they also carry some risk. Investors should carefully consider their risk tolerance and investment objectives before choosing one of these funds.
Which Should You Choose?
Both VT and VTWAX are strong global funds that give investors access to a broad range of global equities. While they have many similarities, there are differences in their holdings and allocation strategies that may make one fund more suitable for certain investors than the other.
Investors should make their choices based on their investment objectives, risk tolerance and overall portfolio allocation. One fund may suit their needs better than another. Therefore, investors should thoroughly review the factors discussed in this article and consult a financial advisor before making an investment decision.
The Vanguard Total World Stock ETF (VT) and the Vanguard Total World Stock Index Fund Admiral Shares (VTWAX) are strong competitors for investors looking to invest in the global equity market. By carefully evaluating the differences between these two funds and taking into account their own investment preferences, investors can make a more informed decision about which fund is more suitable for their portfolio.
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