The Best Index Fund (or ETF)
I've been advocating for broad based, index investing if you follow my blog.
But with so many options, which is the best?
ISAC, WSML, IWDA, CSPX and VWRA
Let's look at how they compare. Take note of the expense ratio and fund size (this affects liquidity, or the bid/ask spread1).
| As of 2021-06-02 | CSPX | ISAC | IMID | IWDA | WSML | VWRA |
|---|---|---|---|---|---|---|
| Expense Ratio (%) | 0.07 | 0.20 | 0.40 | 0.20 | 0.35 | 0.22 |
| Fund Size | 45B | 2.4B | 0.27B | 36B | 4.2B | 2.6B |
| Developed Large Cap | ||||||
| Developed Mid Cap | ||||||
| Developed Small Cap | ||||||
| Emerging Large Cap | ||||||
| Emerging Mid Cap | ||||||
| Emerging Small Cap |
I previously used the CSPX + IWDA combo, as ISAC had an expense ratio of 0.6% (I don't like anything above 0.5%). However, the expense ratio of ISAC has since dropped to 0.2%, making ISAC more attractive. ISAC includes mid and large-cap emerging market stocks, while the CSPX + IWDA combo does not. Also, ISAC does all this in 1 ETF, instead of 2.
I combine ISAC together with WSML (expense ratio of 0.35%), to ensure I am invested globally in small to large-cap stocks across developing and emerging markets.
While the ISAC + WSML combo does not include emerging small cap markets, to me this isn't a problem - I think emerging small caps are quite a gamble. That's my opinion.
FAQ
Why ISAC over VWRA?
VWRA is a Vanguard fund dormiciled in Ireland, tracking the FTSE All-World index, an index covering large and mid-cap companies across developed and developing markets which claims to track 98% of the world investible market capitalization. The MSCI ACWI Index on the other hand, tracks 85% of the global investible set. Apart from some other minor differences, the MSCI and FTSE World indices are similar in that they include mid to large-cap stocks in developing and developed countries. I wouldn't fret over the differences too much. If you're already in ISAC, keep it. Otherwise, you can consider buying VWRA to begin with.
Why not IMID? This includes small to large-cap stocks across developing AND developed markets!
The main reason is due to the small fund size at the moment (0.27B), and the higher expense ration (0.4%). Otherwise, it is an attractive option, being 1 ETF instead of 2.
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This is the difference between the price you buy and sell at. Lower liquidity means this gap will be bigger. ↩