How to Choose Your Retirement Fund - Case Study

A Look at the Markets: Vanguard FTSE All-World ETF

We are just over halfway through the month and the markets are looking positive for November. The markets reacted positively to a clear result in the US election and Donald Trump’s reelection. The chart shows the price at an all-time high (ATH).

We will see if this momentum continues for the rest of the year.

How to Choose Your Retirement Fund - Case Study

In our last two newsletters, we've discussed how to choose an ETF as a vehicle to grow your retirement portfolio. Today, we'll put this knowledge into practice by answering a reader's question about a specific fund.

Important Disclaimer: We do not recommend specific products or equities in these newsletters. Our purpose is to provide knowledge and techniques to help you think about your financial future.

Case Study: iShares Core MSCI World UCITS ETF USD (Acc)

Let's analyse this ETF using the techniques we've discussed in previous newsletters. The main free resource I recommend is JustETF, where you can search for and compare ETF details.

Fund Description - bottom right below

The iShares Core MSCI World UCITS ETF USD (Acc) seeks to track the MSCI World index, which includes stocks from 23 developed countries worldwide. Important note: 'World' in this context means only developed markets, not emerging markets.

Recall our three broad ETF categories:

1. S&P 500

2. Developed World ETF

3. All World ETF (developed and emerging markets)

This fund falls into the second category. Ask yourself: Do you want exposure only to developed markets, or would you prefer the inclusion of emerging markets? There is no universally accepted correct answer - it is a personal choice.

Holdings

I use the ‘Holdings’ section to explore the companies, regions, and sectors within the ETF that I am interested in.

I am particularly interested in over-exposure to one country. For example, this developed world ETF has a 68.46 exposure to the United States. If this is too high for you, you can consider an all-world ETF which includes emerging markets. This reduces the US exposure to around 59%, as shown below:

Your decision may well be based on whether you think that the US will outperform the rest of the world.

Detailed Analysis

1. Total Expense Ratio (TER) (Left red box above)

   • Current TER: 0.20%

   • Recommendation: Use JustETF to compare providers tracking the MSCI World index

   • Example: SPDR MSCI World UCITS ETF offers an alternative option with a TER of 0.12%

2. Provider Reputation

   • iShares is owned by BlackRock, the world's largest asset management company

   • Considered a leading ETF provider with strong market credibility

3. Assets Under Management (AUM)(Right red box above)

   • Minimum recommended fund size: 500 million

   • This fund: 83,598 million

   • Interpretation: Excellent liquidity and long-term viability

4. Distribution Type (Middle red box above)

   • This is an accumulating fund (Acc)

   • Distributing version available, but with higher TER (0.50%)

   • Tax implications vary by country - consult a financial advisor

5. Tracking Error

   • 5-year performance compared to the MSCI World index

   • Outperformed index by 0.07%

   • Considered excellent tracking performance

Conclusion

This appears to be a good fund. However, consider:

• Do you want all-world market exposure?

• Are you comfortable with the current TER?

• Would a cheaper alternative meet your needs?

International Securities Identification Number (ISIN)

An ISIN, a unique 12-character code, serves as a standardized identifier for specific securities, such as ETFs (Exchange-Traded Funds), stocks, and bonds, across global markets. This code ensures consistency and clarity in referring to financial instruments.

When searching for your desired ETF on your broker’s platform, ensure that you use the unique ISIN number. There are numerous ETFs with similar names, so it’s crucial to use the correct identifier.

Practical Advice Are you confident in using JustETF to investigate ETF options? Practice comparing funds, understanding their characteristics, and aligning them with your investment goals.

As always, this newsletter provides general guidance—please consult a qualified professional for personalised advice.

As a reminder, you can see my previous newsletters on this subject here:

Crypto - What Do You Want to Know?

As I write this on Thursday, November 21st, Bitcoin is soaring to an all-time high and is on the verge of surpassing the coveted 100,000-dollar mark. It’s crucial to remember that with cryptocurrencies, profit-taking and significant pullbacks are inherent risks. Declines of up to 80% are not uncommon occurrences. The question remains: will these declines happen at 100,000 USD or even before? I can’t predict the future, but I’ve mentally prepared myself for whatever may come.

As we approach this milestone, I want to take the opportunity to answer your crypto-related questions. What do you want to know about crypto and other cryptocurrencies? I will try to answer your questions in next week's newsletter.

How to Participate

Simply reply to this email with your crypto-related question. Whether you're curious about Bitcoin's potential, interested in understanding blockchain technology, or want to know more about other cryptocurrencies, I'm ready to help demystify this complex and dynamic market.

Reminder: Cryptocurrency investments carry high risk. Always do your own research and never invest more than you can afford to lose.

Compound of the Day: Case Study

Case study - compound noun - countable - a detailed study of a person, group or thing, especially to show general principles

Plural: Case studies

A compound noun is a noun made up of two or more words that function together as a single unit to represent a specific concept or idea.