🏁 Why buying a World ETF is a smart Investment
Booming markets, Bitcoin chasing new records and Gamestop exploding are just a few of the recent events in the financial world. Everybody seems to get rich these days. On the other hand in March 2020 we saw a different picture that scared many people and what will the future bring? It makes sense to take a step back and think first instead of following a trend. Here are five reasons why buying a World ETF is the smart Investment for most investors. This is my own opinion on the topic, please don’t consider it as investment advise.
🏦Investing doesn’t have to be difficult
Managing your money can be a daunting task, especially when following the recent headlines. Fear of missing out can lead to hastily investments, which is never a good idea. Whatever your knowledge is, start by making your own research first. Second, decide how much you are willing to invest and over what period. Never invest money that you might need on a short term basis. Look at my 12 investment rules if you are not sure. But isn’t buying a World ETF a boring investment approach you might ask. Here are my five reasons, why buying a World ETF is a smart investment:
#1 – Investing in all countries with one Fund
Instead of choosing single stocks to pick you invest in one World ETF and have a stake in lots of different companies and countries with one investment (high diversification). You will not cover every niche that there is but for most investors that is not necessary.
#2 – Following the trend with your one investment
With a World ETF you follow the biggest capitalized companies/sectors/countries all at once. Companies may come and go but you don’t need to worry about that because your World ETF reflects the biggest and most successful participants in the finance game. If of these companies goes bankrupt it will be replaced immediately by the next market leader. With single stocks you need to keep an eye on this, with your World ETF this is none of your concern.
#3 – More bang for your buck aka low costs
It can’t get any cheaper than with a World ETF because you have much lower transactions fees that active managed portfolios have. The TER of most World ETFs is pretty low compared to their active alternatives. While you think fees don’t matter that much, if you look at it on a 15 to 40 year investment horizon it will make a significant difference. But don’t worry about this as your investment is cost-efficient.
#4 – Simplicity is beautiful and saves you time
Having one singe World ETF in your portfolio can save you a lot of time. There will be no rebalancing necessary and you don’t need to jump on the hype train of a short term trend. Ideas of potentially good investments are plenty to be found, especially when the markets go up. Trends however come and go but you don’t need to bother about these as your portfolio is perfectly fine the way it is.
#5 – No need to worry about market news
Because you are well diversified with a world ETF you don’t need to follow the news in order to stay up to date what the markets are doing. You can pretty much invest and forget as you are in this game for the long run. Yes the markets will go down at one point and then go up again. No need to loose any sleep over this. Just keep investing on a regular basis according to your plan and let the money work for you, while you pursue other interests.
💡 So why is not everybody doing this you ask
There are plenty of reasons to buy a World ETF as mentioned above. On the other hand some people love the challenge to try to outperform the market by picking single stocks. Others just enjoy analysing companies and putting their money where they believe it will generate them good returns. It is not the most efficient approach on a long term basis but tastes are different as always in life. Most people however lack the time, knowledge and interest and for those people a World ETF is the smartest thing to do.