Global Tracker Funds - Why They Are Great and How to Select One

Global tracker fund takes care of all your equity diversification needs in a single investment product. 

That alone makes them super sexy and fit right into the World Chef philosophy of - “Let Your Wealth Be Easy”

In this article and video I’ll explain how to choose the best global tracker fund for you and share a list of those available in various countries from the choices on offer. 

What is a tracker fund?

A tracker fund is an investment fund that tracks an index like the S&P 500 for the US or, in the case of a global tracker, an index such as the MSCI All World Index. 

Your money is pooled together with all the other investors in that particular tracker fund and this capital is invested by the fund’s management team into the index that fund is tracking - and in the case of a Global or All World fund - into every major stock market on the planet. 

As an investor in an index fund, you effectively own a slice of thousands of world-class companies with ONE investment! 
How cool is that?

When you invest into a broad market index fund like a global or All World index tracker fund you buy into entire industries, countries, and continents at a stroke. 

The index followed by a global tracker fund is essentially an international league table of the world’s top companies, from Amazon to Google to Nvidia to the Taiwanese semiconductor giant Taiwan Semiconductor TSMC. 

Global tracker funds buy and sell shares in the companies listed on a specific index to try and replicate the chosen index as faithfully as possible. 

If a company starts underperforming and drops down the ranks - it will fall out of the index and no longer be held by the fund. Conversely - when a new sector or company rises, it goes into the index and the fund buys shares in that company.

This means index trackers optimise to hold only the top performing companies. 

Investing this way is known as index investing or passive investing. It is the best strategy to choose in order to maximise your chances of creating real wealth and achieving your Freedom Number.

Global tracker funds – what really matters?

All-World and Global – Most products labelled world index funds only include developed world countries. They skip the emerging markets, including the likes of China, Brazil, Africa and India.

As such ‘world index trackers’ are less representative of the global economy. 

Instead look for ‘All-World’ or ‘Global’ index funds that include emerging markets. That said, always look at the Fund fact Sheet to confirm what the fund is invested in - don't just rely on the label.

Alternatively, if you do choose a developed world only tracker, you can add an emerging market index fund to your portfolio to make up the difference.

Diversification – Following on from the above, compare how many stocks your shortlist of global tracker funds includes. The more the better, because your index fund will then do a better job of representing the global stock markets that it tracks.

Cost – This is the most important factor that will impact your returns and one of the few things you can control. When selecting your fund - performance is irrelevant - after all the tracker funds you are looking at all track the same index. So the performance is from the index NOT the particular fund you select. When selecting your fund just pick the cheapest by Ongoing Charge Figure (OCF) / Total Expense Ratio (TER). Don’t fret about small differences in costs between the funds you have to choose from. Remember you are aiming to keep your costs below 1% and most of these All World / Global Tracker funds will have costs under 0.25%.

Click Here to Watch this video on how to select a Fund to Invest in

I also have a video on how to Read a Fund Fact Sheet: 

If you are based in the UK - Click here to watch

If you are based in the South Africa - Click here to watch

Watch this video to learn how to read a Fun Fact Sheet!

Accumulation - You also want to select an accumulation type fund (if one is available). This means when the companies held in your tracker distribute their profit to their shareholders - a.k.a you - in the form of dividends - those dividends are used to buy you more units of the fund automatically - triggering one of the Rules of Wealth - you must reinvest your investment returns.

Global index fund or global ETF?

ETFs and Unit Trust / Mutual Fund index funds are both types of index tracker funds. They’re both excellent ways of quickly diversifying your investments across the globe for an amazingly low cost. 

We’re equally happy using ETFs or index funds and include both in our best global tracker fund table below. 

Which you will choose will depend on what is available to you in your country and on your investment platform.

The only time the fund type is a deal breaker is if:

• Your stockbroker charges an ETF dealing fee that costs more than 1% of your transaction value.
• The same broker allows you to invest in index tracker unit trust / mutual funds for free. 

In that case, you should invest in a global unit trust / mutual fund type of index fund in preference to the global ETF type tracker fund. 

That’s because the impact of a high dealing fee is surprisingly damaging over the long-term. Yep - COSTS MATTER!

All World / Global Tracker Funds Examples

Here’s a useful video on how to read at a fund factsheet.

If you are in the UK: 

If you are in South Africa:

What is most important is that you don’t overthink this. Setting up your regular investment and getting your assets growing IS the most important.

If you have not yet set up your core investing strategy and are NOT yet feeling totally confident about your investing and your overall wealth plan - watch this free training on How To be A Savvy Investor.

And remember, let your investing be safe, simply, sexy - and most importantly - easy.

Big love

Ann