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Own the World - Investing in World Stock Funds


Deciding how much of your money to keep at home and how much to invest overseas can be a difficult decision. And with more than 50 international stock markets to choose from, picking which countries to invest in - and which to avoid - involves even more decisions.

For investors who prefer to put their portfolio on autopilot, there's an easy way to avoid making these tough decisions. So-called total world or all-world index funds can help.

Here's how it works. Instead of trying to decide whether or not the U.S., Asia or Europe will be a better place to invest, a total world fund simply owns a little bit of everything.

The Vanguard Total World Stock ETF is an example of this type of fund. It's an exchange-traded fund that is designed to track the performance of the FTSE All-World Index, which represents nearly 3,000 stocks in 47 markets.

The big advantage to an all-world fund is that you are guaranteed to capture the average performance of all major global markets. (Whether or not this performance is good or bad is another story.)In other words, you'll never "beat the market" - but on the other hand, you won't under-perform either.

It's important to note that "world" funds - as opposed to "foreign" or "international" funds also include U.S. stocks, which account for a little less than half of the portfolio in the case of Vanguard's Total World fund.

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