Recently, I had a conversation with a friend who shared that he avoids investing altogether, feeling overwhelmed by the complexities of the financial world. He sees investing as something out of reach—something that requires time, specialized knowledge, and constant monitoring. This got me thinking about how to simplify things for anyone looking to invest sustainably without having to navigate a maze of financial jargon and complicated strategies.

That’s why I decided to write about an “all-weather” portfolio strategy using two globally diversified ETFs: the Vanguard FTSE All-World UCITS ETF (VWRA) and the iShares Core Global Aggregate Bond UCITS ETF (AGGG). By combining these two funds, you can cut through the noise and build a resilient portfolio that’s designed for sustainable long-term returns. Whether you’re just starting or are a seasoned investor looking for a reliable global strategy, this approach offers a straightforward path to achieving broad market exposure and balanced growth potential. Let’s dive into why a global portfolio with VWRA and AGGG can serve as a foundation for investors at any stage of life.

When considering global investments, a strategic mix of equity and bond funds can help diversify your portfolio while balancing risk and growth potential. Today, let’s explore the Vanguard FTSE All-World UCITS ETF (VWRA) and a selected Global Bond ETF, the iShares Core Global Aggregate Bond UCITS ETF (AGGG). These two funds offer broad, cost-effective exposure to global markets, making them ideal for investors aiming to build a globally diversified, resilient portfolio.

Why Go Global?

Investing globally means you’re not only putting your money in one market, like the U.S., but spreading it across various regions and economies. This broader exposure helps mitigate risks tied to a single country’s economic cycles, currency volatility, and geopolitical events. Moreover, global diversification can capture growth in emerging markets and stabilize returns with bonds from developed economies. Let’s break down these two key components:

VWRA ETF: Capturing Global Equity Growth

The Vanguard FTSE All-World UCITS ETF (VWRA) is a comprehensive fund that seeks to replicate the performance of the FTSE All-World Index, covering large and mid-cap companies from developed and emerging markets. Here’s why it’s a great choice for global equity exposure:

1. Broad Diversification and Tax Efficiency: VWRA holds over 3,700 stocks globally, with significant exposure to the U.S. (60.4%), Japan (6.3%), and the UK (3.9%) as of mid-2024. Being domiciled in Ireland, VWRA benefits from a favorable tax treaty, resulting in a dividend withholding tax rate of 15% for many non-U.S. investors, compared to 30% on similar U.S.-domiciled ETFs like the Vanguard Total World Stock ETF (VT). This tax efficiency is particularly beneficial for investors in regions such as Singapore .

2. Cost-Effective: VWRA has an expense ratio of 0.22%, which is competitive for a globally diversified ETF, keeping fees low for investors.

3. Growth Potential and Volatility: With top holdings like Apple, Microsoft, and Amazon, VWRA provides exposure to high-growth sectors. However, investors should note its volatility: VWRA has a standard deviation of approximately 18.3%, indicating a higher level of risk. The fund has experienced drawdowns as high as 40% during market downturns, which may not suit all investors .

4. Historical Performance: Since its inception, VWRA has delivered a compound annual growth rate (CAGR) of 9.24%. This highlights the fund’s ability to capture equity market growth over time, though investors should be prepared for potential fluctuations associated with global equities .

Global Bond ETF (AGGG): Stability and Income

To balance the equity exposure from VWRA, adding a Global Bond ETF provides stability through fixed-income investments. The iShares Core Global Aggregate Bond UCITS ETF (AGGG), which tracks the Bloomberg Barclays Global Aggregate Bond Index, is an excellent counterpart. Here’s how it complements VWRA:

1. Income and Lower Volatility: AGGG offers relatively stable returns, with a weighted average yield to maturity of 3.47% and a lower standard deviation compared to equities. The fund includes government and corporate bonds, which tend to be less volatile, making it a useful counterbalance to VWRA’s equity exposure .

2. Diversification Beyond Equities: AGGG includes bonds from both developed and emerging markets, providing broader economic exposure and helping mitigate risks associated with any single region. Additionally, currency-hedged options are available, allowing investors to reduce the impact of exchange rate fluctuations on their returns .

3. Historical Performance: AGGG’s recent performance reflects both the stability and the challenges of global bond investing. Over the past year, it achieved an 11.86% return, although its 3-year annualized performance stands at -3.12%, indicating that bond markets have faced significant headwinds. Long-term investors in AGGG, however, have experienced relatively consistent returns in line with global bond yields, making it a resilient fixed-income option for portfolios .

Building a Balanced Global Portfolio

When you combine VWRA and AGGG, you’re creating a balanced portfolio that captures the growth of global equities and the stability of global bonds. Here’s how they can work together:

• Allocation: A typical balanced allocation might be 60% VWRA for growth and 40% AGGG for stability, but this depends on your risk tolerance. Younger investors may lean more towards equities, while those closer to retirement might prioritize bonds.

• Rebalancing: Over time, as equities or bonds outperform, your allocation may shift. Regularly rebalancing ensures that you maintain your desired risk level.

• Global Exposure: With VWRA, you’re investing in companies across sectors and regions, while AGGG offers access to a diverse range of bonds. This combination is designed to reduce single-country risk and capture returns from a range of economic environments.

Final Thoughts

A global portfolio using VWRA and AGGG is an excellent choice for investors looking to diversify beyond their home market. With exposure to both growth-oriented equities and income-producing bonds, you’re well-positioned to weather market volatility and benefit from global economic trends. Going global is not only about pursuing higher returns but also about building a resilient, balanced portfolio that can thrive across different market conditions.

As always, assess your risk tolerance and investment goals before choosing your allocation, and consider consulting a financial advisor to tailor a strategy that suits your specific needs. Happy global investing!

References

• “Vanguard FTSE All-World UCITS ETF,” The Fifth Person. Accessed [date]. https://www.fifthperson.com.

• “Why the VWRA ETF is a Top Pick for Long-Term Investors,” Growbeansprout.com. Accessed [date]. https://www.growbeansprout.com.

• “iShares Core Global Aggregate Bond UCITS ETF,” iShares by BlackRock. Accessed [date]. https://www.ishares.com.