The best global ETFs to watch

Investing using Exchange Traded Funds (ETFs) is an increasingly common strategy, for a variety of reasons. ETFs allow you to buy into a ‘basket of securities’ based on a specific sector or investing approach, without having to buy the assets individually.

This approach gives investors increased exposure to a diversified range of investments in a single trade, with the ability to manage risk by trading futures just like an individual stock. Further, ETFs boast the trading liquidity of equity unlike the rigidity of a mutual fund. Other than the convenience, passive ETFs usually offer low expense ratios and lower broker commissions than buying the constituent assets individually.

Naturally, ETFs can contain all sorts of investments, including stocks, commodities, and bonds — sourced from all over the world. With inflation falling amid analyst hopes that interest rates will start to tumble in H2 2024, investors are nevertheless seeking the diversification on offer in some of the best global ETFs to protect their portfolios in case of a hard landing.

It’s worth noting that an ETF will only ever perform as well as its underlying constituents. We do offer an ETF screener that can help to inform your investing decisions — but these five could be some of the best global ETFs to watch as a starting point.

Top global ETFs to watch

The following five ETFs have been chosen for their widespread popularity among investors. They are not necessarily the top performing ETFs but are often found in portfolios. Past performance is not an indicator of future returns.

1. Vanguard FTSE All-World UCITS ETF
2. iShares Core S&P 500 ETF
3. Invesco Physical Gold ETC
4. Vanguard FTSE Emerging Markets ETF
5. iShares UK Dividend UCITS ETF

Vanguard FTSE All-World UCITS ETF

The Vanguard FTSE All-World UCITS ETF is arguably the most ‘global’ ETF on the market today, as well as being one of the most popular ETFs in the world. It aims to track the performance of the FTSE All-World index, made up of large and mid-sized companies across both developed and emerging markets.

This index provides exposure to almost 4,000 companies from across 50 countries at a low annual fee, and arguably offers possibly the most diversified portfolio of stocks possible. On the other hand, it does have a geographical bias, with 64% of companies in the ETF based in the US. And because of the relative size of the US tech giants, the FTSE All-World’s biggest sector is usually technology — which can be volatile.

And over the longer term the index is usually beaten by the S&P 500. But the perceived safety of diversification can be attractive — investors get exposure to some emerging markets, the capital gains of the AI-fuelled US tech bubble, and a modicum of protection from single country downturns.

iShares Core S&P 500 ETF

There are many S&P 500 tracker ETFs on offer, but the iShares Core S&P 500 UCITS ETF is one of the most popular among UK investors.

This passive ETF attempts to, as closely as possible, follow the performance of the S&P 500 index, which tracks the performance of the largest 500 companies listed in the United States by market capitalisation. This includes market titans such as Microsoft, Apple, Meta, Amazon, and Alphabet — but also smaller mid-sized companies that could grow into the blue chips of tomorrow.

The ETF has an expense ratio of just 0.03%, and the S&P500 has delivered average annual returns of 10.15% since 1957. This makes the tracker an exceptionally popular ETF for SIPP holders looking to benefit from long-term capital gains growth — and though past performance is no guarantee of future success, S&P 500 index investing is often considered to be a lower-risk investing strategy.

Indeed, legendary investor Warren Buffett has often argued the index is the only investment the average person needs for retirement savings — though others disagree. It’s worth noting that that this particular ETF has lower liquidity than others on the market with higher expense fees, so is better suited to long-term investors.

Invesco Physical Gold ETC

The Invesco Physical Gold ETC seeks to replicate the performance of the London Gold Market Fixing Ltd PM Fix Price/USD, with the fund backed one-to-one with gold bullion held by JP Morgan Chase in London bank vaults.

Gold remains at just under $2,000/oz levels, as the traditional real asset inflation-hedge, which preserves purchasing power and acts as a protective asset in times of severe market stress, once again performs admirably in this inflationary environment.

For context, central banks bought a record 1,136 tons of the precious metal in 2022 and continued to buy record amounts in 2023. And with the US dollar likely to fall in value should rates start to come down, gold could go on to hit another record high in 2024.

Vanguard FTSE Emerging Markets ETF

The Vanguard FTSE Emerging Markets ETF tracks the FTSE Emerging Markets All Cap China A Inclusion Index — which, as the name suggests, tracks the performance of equities issued by companies in emerging markets. This includes China, Brazil, Taiwan, and South Africa.

Vanguard notes that the index has ‘high potential for growth, but also high risk; share value may swing up and down more than that of stock funds that invest in developed countries.’ Its top three holdings include the market leading Taiwan Semiconductor Manufacturing Company Limited, alongside Chinese platform stock Tencent, and e-commerce titan Alibaba.

The ETF does have a low expense fee at 0.08%, but can be regarded as much higher risk than others on this list.

iShares UK Dividend UCITS ETF

The iShares UK Dividend UCITS ETF focuses on some of the best London-listed companies — those which boast the highest dividend yields.

Instead of investing in all the companies on the FTSE 100 or FTSE 250 (a common approach), it instead offers diversified exposure to the top 50 UK companies within the FTSE 350 with the highest dividend yield (excluding investment trusts).

HSBC, Rio Tinto, and Legal & General are its top holdings, alongside other miners, banks, and several defensive stocks with a reliable history of dividend pay-outs. Of course, there are risks — dividends are not guaranteed and cyclical companies like Rio Tinto or Persimmon can see their dividend yields fall in poor years.

How to invest and trade in the best global ETFs to watch with us

You can choose to either invest in an ETF, or to trade it. When you invest, you own the underlying shares in the ETF outright and are entitled to any dividends that are paid; you also make a profit if the ETF price appreciates. With us, you can buy ETFs using a share dealing account.

Learn about the difference between trading and investing.

Trading an ETF enables you to speculate on the future share price’s movement of an ETF – whether you believe it will fall (in which case you’d go short) or rise (in which case you’d go long).

You would not own the underlying ETF and won’t receive any dividends, but you can use leverage. Leverage enables you to open a larger position with a small deposit (called a margin), which can help you stretch your capital a little further. However, total profits and losses could easily exceed your margin amount, as they are calculated on total position size, so you’re advised to trade carefully.

This can be achieved using the steps below:

1. Create or log in to your share dealing or trading account
2. Research the company you want to take a position on
3. Carry out technical and fundamental analysis
4. Set your stops and limits
5. Open and monitor your position

Find out the difference between CFDs and spread betting here.

Top global ETFs summed up

ETFs can be a low cost way to invest in the global stock markets. These five ETFs are just some of the best global ETFs available to watch - there are many others. Always do your own research. Past performance is not a guide to future returns.

Trade and invest in over 17,000 UK, US and global shares from zero commission with us, the UK’s No.1 trading provider.* Learn more about trading or investing in shares with us, or open an account to get started today.

*Based on revenue excluding FX (published financial statements, October 2021).