VT vs ACWI: The Difference? (Besides the Letters)
LAST UPDATED: July 16, 2023 | By Conrad Golly
When it comes to investing, there are countless options available. It can be overwhelming to try and choose the right funds to invest in. Two popular options are VT and ACWI.
Both funds offer exposure to a broad range of stocks from around the world. But what’s the difference between VT vs ACWI? I decided to do some research and compare the two funds.
After all, I want to make sure my investments are working as hard as possible for me.
In this article, I’ll break down the similarities and differences between VT and ACWI. Whether you’re a seasoned investor or just starting out, this information will help you make an informed decision about which fund is right for you.
VT vs ACWI: What They Are
VT
VT stands for Vanguard Total World Stock ETF, which is an exchange-traded fund that tracks the performance of the FTSE Global All Cap Index.
The fund aims to provide investors with exposure to the entire global equity market, including developed and emerging markets. It is a passively managed fund that holds over 8,000 stocks across 47 countries, with a focus on large-cap companies.
ACWI
ACWI stands for iShares MSCI ACWI ETF, which is an exchange-traded fund that tracks the performance of the MSCI All Country World Index. The fund aims to provide investors with exposure to both developed and emerging markets, holding over 3,000 stocks across 23 developed and 27 emerging markets.
It is also a passively managed fund with a focus on large-cap companies.
Both VT and ACWI are ETFs, which are investment products that trade on stock exchanges like individual stocks. They are designed to provide investors with exposure to a diversified portfolio of securities, making them a popular choice for those looking to invest in the stock market.
While both funds have a similar objective of providing global equity exposure, there are some key differences between them. Here’s a breakdown of their differences:
| VT | ACWI | |
|---|---|---|
| Expense Ratio | 0.08% | 0.32% |
| Holdings | 8,000+ stocks across 47 countries | 3,000+ stocks across 23 developed and 27 emerging markets |
| Sector Exposure | Lower exposure to the technology sector | Higher exposure to the technology sector |
| Performance | Historically provided higher returns than ACWI | Historically provided lower returns than VT |
One of the biggest differences between VT and ACWI is their expense ratio. VT has a significantly lower expense ratio of 0.08%, compared to ACWI’s expense ratio of 0.32%. This means that investors in VT will pay less in fees over time, making it a more cost-effective option.
Another difference is their sector exposure. VT has a lower exposure to the technology sector, while ACWI has a higher exposure. This means that investors in VT may be less exposed to the risks and volatility of the technology sector, while investors in ACWI may have more exposure.
Finally, historical performance is another key difference between the two funds. While both funds have provided investors with exposure to the global equity market, VT has historically provided higher returns than ACWI.
However, past performance is not a guarantee of future results, and investors should always do their own research before making investment decisions.
VT and ACWI are both ETFs that provide investors with exposure to the global equity market. While they have similar objectives, there are some key differences between them, including their expense ratio, sector exposure, and historical performance.
Investors should carefully consider these differences before making investment decisions.
Performance Comparison VT vs ACWI
Returns
When it comes to returns, both VT and ACWI have delivered pretty close results over the past 10 years. According to PortfoliosLab, VT has had a 8.42% annualized return while ACWI is not far behind at 8.41%. However, year-to-date returns for both investments are quite close, with VT having a 8.20% return and ACWI slightly higher at 8.59%.
Expense Ratio
Expense ratio is an important factor to consider when comparing ETFs. The expense ratio of VT is 0.24 percentage points lower than ACWI’s (0.08% vs. 0.32%). This means that investing in VT might be a bit cheaper than investing in ACWI.
Holdings
ACWI and VT are passive ETFs, meaning that they are not actively managed but aim to replicate the performance of the underlying index as closely as possible. Both ETFs have a similar number of holdings, with ACWI having 3,005 and VT having 8,256 holdings.
However, there are some differences in the sectors they invest in. According to Mr. Marvin Allen, VT has a lower exposure to the technology sector compared to ACWI.
Dividend Yield
Dividend yield is another important factor to consider when comparing ETFs. According to ETF Database, the dividend yield for ACWI is 2.30% while the dividend yield for VT is 1.76%. This means that investing in ACWI might provide a higher dividend yield compared to VT.
Sharpe Ratio
Sharpe ratio is a measure of risk-adjusted return. According to ETF.com, the Sharpe ratio for ACWI is 0.67 while the Sharpe ratio for VT is 0.68. This means that investing in VT might provide a slightly better risk-adjusted return compared to ACWI.
Overall, both VT and ACWI have their pros and cons when it comes to performance. It’s important to consider all the factors mentioned above before making an investment decision.
Advantages and Disadvantages: VT vs ACWI
Advantages of VT
As an investor, I find that VT has several advantages over ACWI. Firstly, VT tracks the FTSE Global All Cap Index, which includes over 9,000 securities, providing me with a more comprehensive exposure to global markets. Secondly, VT has a lower expense ratio compared to ACWI, which means I can save more on fees over the long term.
Another advantage of VT is that it invests in small-cap stocks, which can provide higher returns over the long term. Additionally, VT has a lower turnover rate, which means fewer capital gains distributions, reducing my tax liability.
Lastly, VT has a higher dividend yield compared to ACWI, which can provide me with a steady income stream.
Disadvantages of VT
While VT has several advantages, it also has some drawbacks. One disadvantage is that it has a higher standard deviation compared to ACWI, which means it can be more volatile. Additionally, VT has a lower exposure to the technology sector, which can limit my potential returns if the sector performs well.
Another disadvantage is that VT has a lower liquidity compared to ACWI, which can make it harder to buy and sell securities quickly. Lastly, VT may not be suitable for investors who want to invest in specific regions or sectors, as it provides a broad exposure to global markets.
Advantages of ACWI
ACWI also has several advantages that make it a good investment option. Firstly, ACWI tracks the MSCI All Country World Index, which includes over 2,800 securities, providing me with a broad exposure to global markets.
ACWI has a higher exposure to the technology sector, which can provide higher returns if the sector performs well.
Another advantage of ACWI is that it has a higher liquidity compared to VT, which means I can buy and sell securities quickly. Lastly, ACWI may be a good option for investors who want to invest in specific regions or sectors, as it provides a more tailored exposure to global markets.
Disadvantages of ACWI
While ACWI has several advantages, it also has some drawbacks. One disadvantage is that it has a higher expense ratio compared to VT, which means I will pay more in fees over the long term. Additionally, ACWI ignores small-cap stocks, which can limit my potential returns over the long term.
Another disadvantage is that ACWI has a higher turnover rate, which means more capital gains distributions, increasing my tax liability. Lastly, ACWI has a lower dividend yield compared to VT, which can limit my potential income stream.
Overall, both VT and ACWI have their advantages and disadvantages, and as an investor, it’s important to consider my investment goals and risk tolerance before choosing one over the other.
VT vs ACWI, What to Do?
So, after all this research and analysis, what’s my recommendation?
Well, it depends on your investment goals and risk tolerance. Here are some things to consider:
- If you’re looking for a low-cost, diversified investment that tracks the global stock market, both VT and ACWI are solid options.
- If you prefer Vanguard as an investment company, then VT is the way to go. But if you prefer iShares MSCI ACWI ETF, then ACWI is the clear choice.
- If you’re looking for a slightly lower expense ratio, then VT wins out with its 0.08% compared to ACWI’s 0.32%.
- If you’re looking for exposure to the technology sector, then ACWI is the better choice as it has a higher allocation to tech stocks.
- If you’re looking for a fund with a higher standard deviation, then VT is the way to go as it has a slightly higher risk profile.
Overall, both VT and ACWI are excellent investment options for those looking to hold a diversified ETF that tracks the global stock market. It’s up to you to decide which one fits your investment goals and risk tolerance better.
Just make sure to do your own research and due diligence to ensure the accuracy, completeness, and timeliness of the information you’re using to make your investment decisions.
Issuer Information VT vs ACWI
Issuer
When it comes to ETFs, the issuer is just as important as the ETF itself. After all, you want to make sure you’re investing with a reputable company that has a solid track record. In the case of VT and ACWI, we have two giants in the ETF world – Vanguard and iShares.
Vanguard is a household name in the investing world, known for its low-cost index funds and ETFs. The company was founded in 1975 and has grown to become one of the largest investment management companies in the world, with over $7 trillion in assets under management (AUM). Vanguard offers a wide range of ETFs, including VT.
iShares, on the other hand, is a subsidiary of BlackRock, another massive investment management company. iShares was founded in 1996 and has become one of the largest ETF providers in the world, with over $2 trillion in AUM. The iShares MSCI ACWI ETF is one of the company’s flagship products.
AUM
As mentioned earlier, both Vanguard and iShares are massive investment management companies with trillions of dollars in AUM. However, when it comes to their respective ETFs, there is a bit of a discrepancy.
VT has over $31 billion in AUM, which is impressive by any standard. However, the iShares MSCI ACWI ETF is even more impressive, with over $14 billion in AUM. This makes it one of the largest ETFs in the world.
In terms of AUM, it’s clear that iShares has the upper hand. However, it’s worth noting that AUM isn’t everything. There are other factors to consider when choosing an ETF, such as expense ratio, performance, and holdings.
That being said, it’s always reassuring to know that you’re investing with a company that has a significant amount of assets under management. It shows that other investors trust the company and its products, which is always a good sign.
Final thoughts: VT vs ACWI
Well, after all that research and analysis, I have to say, the difference between VT and ACWI is not that significant. But, hey, that’s just my opinion.
If you’re trying to make a decision between these two ETFs, I suggest you do your own research and come to your own conclusions. Don’t rely solely on my opinions or anyone else’s for that matter.
When it comes to making investment decisions, it’s important to take action based on your own research and analysis, and not just blindly follow the opinions of others.
Keep in mind that past performance is not necessarily an indicator of future results. So, don’t make your decision solely based on the historical data of these ETFs.
Also, consider the suitability of these ETFs for your own investment goals and risk tolerance. What works for one investor may not work for another.
Before you go…
