What no one explains properly – Buying Best International ETFs is about right benchmarks (MSCI vs FTSE)

Choosing the Best International ETFs for your Equity Portfolio

Key Takeaways

  • International ETFs can be confusing due to different naming conventions of the Index Providers – I had a deep dive into the way they work, and hope you can benefit from it as well
  • ETFs can be divided into (i) Developed vs Emerging and (ii) Small to Large Caps
  • By understanding how these are divided you can control the allocation to them in your portfolio – read why it may be beneficial in a long term investment portfolio
  • International Equity ETFs usually track either an MSCI or FTSE Benchmark Index – understanding them is the most important step in choosing an International ETF
  • There are some differences in coverage and country classification – try to use the same family of indices 
  • Periodic rebalancing of your portfolio is a great way to control your allocation to Emerging/Developed Equities over time and to observe how these markets perform  
  • You will find recommended ETFs that also include Funds that exclude your country (International ex-US, ex-UK) so that you can control allocation to your domestic equities

Making sense of International Equity Indices

In order to understand Equity ETFs, you need to find the right Index. I will start by describing the structure of the Market using MSCI Indices since they have a longer history

Following this introduction I will show differences with the FTSE Global Index Series to let you decide which one is more suitable as a benchmark for your ETFs

How do I select an International ETF?

World Equity ETFs are usually divided based on two main characteristics:

  • The type of Economy and country allocations
  • The size of the Companies in the Fund

Economy Type

23 Developed Economies and 26 Emerging Countries

VTI UCITS etf equivalent for UK and European investors
Source: MSCI, Bankeronwheels.com, data as of August 2020.

What are the types of Economies can I select?

Countires and their Equities are broadly divided into three categories: 

  • Developed market ETFs – funds with Stocks from countries with high income, openness to foreign ownership, ease of capital movement and efficiency of market institutions
  • Emerging market ETFs – funds with Stocks from countries that have some characteristics of a developed market, but do not fully meet its standards
  • Frontier market ETFs – companies in countries that are more developed than the least developing countries, but too small, risky, or illiquid to be generally considered an emerging market
best international ETFs - emerging vs developed markets
Source: Bankeronwheels.com, data as of August 2020

What part of all Global Stocks are represented by Developed Markets in ETFs?

Developed Markets represent about 90% of all Stocks in World ETFs. Out of the Developed Markets ETFs over 60% are US Stocks. The remaining are mainly Japanese and European Equities.

What part of all Global Stocks are represented by Emerging Markets in ETFs?

Emerging Markets currently represent about 10% of all Global Stocks. 

What are Frontier Markets?

Frontier Markets are tiny and not represented in ACWI Indices – for this you would need a special ETF (but this remains niche investing) – see the FTSE breakdown in the section below.

Country Allocations

How much exposure will I have to different countries if I buy a World ETF?

best international ETFs - msci acwi all world - iShares MSCI ACWI ETF acwi - country breakdown - index investing - bogleheads
Source: Bankeronwheels.com, data as of August 2020

As of Q1 2020, if you buy a Global or World ETF, US Stocks will compose approx. 55% to 60% of the overall exposure. Japan represents between 6-7% while Chinese Stocks amount to about 5-6%.

What part of World Stocks are represented by Chinese Equities?

It may be surprising that Chinese Stocks represent just over 5% of Global Equities

Despite being some of the largest exchanges in the world, China’s stock markets are still relatively young and do not play as prominent a role in the Chinese economy as America’s do in the U.S. economy – in China only a small percentage financing is funded by equity. Chinese corporations rely much more heavily on bank loans and retained earnings

Buying a Global or World ETF is the easiest option to get exposure to Stocks covering all Economies and all sizes of Companies. Any ETF that covers All Country World or All Country World IMI (or FTSE Equivalent as described below) should be efficient and will align your portfolio with the market allocation to those countries

How much exposure will I have to different countries if I buy an Emerging Market Equity ETF?

best international ETFs - msci emerging markets - iShares MSCI Emerging Markets ETF EEM - country breakdown - index investing - bogleheads
Source: Bankeronwheels.com, data as of August 2020

While Chinese Stocks represent just 4-5% of World Equities they do represent over 40% of all Emerging Market Stocks. Taiwan is the second largest country with approx. 12-13% allocation and South Korea is 11-12%.

India and Brazil are between 5-10%. Marginal contributors include countries such as South Africa, Mexico, Indonesia or Russia.

How much exposure will I have to different countries if I buy a Developed Market Equity ETF?

best international ETFs - msci developed markets world - iShares MSCI World ETF URTH - country breakdown - index investing - bogleheads
Source: Bankeronwheels.com, data as of August 2020

US Stocks are heavily represented in Developed Market ETFs with an allocation of approx. 65%, followed by Japan with 7-8% allocation and the UK 4-5%. Minor contributors include various individual EU countries, Canada or Australia.

The more advanced option is to break down a Global Index in your portfolio into Developed and Emerging and control on your own what percentage you want to allocate to them

Company Size

What is the breakdown of Global ETFs based on company size?

Breakdown of International Equity ETFs by company size according to MSCI
best international ETFs - MSCI world msci world imi msci all country acwi merging markets msci em imi large small micro cap ETF index investing bogleheads
Source: MSCI, Bankeronwheels.com; As of 28/06/2019

Large and Mid Caps represent 85% of all World Equities

  • Large and Mid Caps are part of MSCI World (don’t ask me why MSCI call Developed Countries ‘World’) and MSCI Emerging Markets Indices (85% of World Capitalization)
  • Small Caps are included in “Investable Market Index” aka IMI Indices and together with the above categories represent the entire World Market (outside of micro caps)

ETF Benchmarks - MSCI vs FTSE

Should I buy an ETF tracking an MSCI or FTSE Index?

Now that I have covered how MSCI Indices work let’s have a quick comparison with FTSE. Most International Equity ETFs will track either MSCI or FTSE. 

For a long term investor covering the entire market differences are marginal but try to be consisent when you invest granually e.g. don’t mix the two since you may invest in Korea or Poland twice or not at all. FTSE has larger coverage if you don’t invest in a World index that includes Small Caps.

Here is how FTSE and MSCI differ:

  • FTSE includes more small caps in the “non IMI” Indices – This is an important factor because the largest International ETFs usually exclude small caps (aka IMIs). MSCI global indices capture 85% of the universe by market cap in non-IMI Index and exclude the bottom 15% as small-cap firms. FTSE global indices track 90% world markets and exclude the bottom 10% as small-cap firms. This difference is not important if you invest in the broader Investable Market Indices (IMI) to cover small caps, too.
  • They can treat China differently – MSCI has been feeding Chinese A-shares since June 2018 and increased the 5% cap over time. FTSE introduced these companies a year later and has a 5.5% cap at this time. Currently China is 40% of MSCI and 43% of FTSE (if we exclude Korea from MSCI these will be very similar)
  • The providers classify certain Emerging Countries differently – For example, FTSE indexes classify South Korea or Poland as developed markets while MSCI considers them as emerging markets

FTSE Structure is broadly simiar, above I have highlighted some differences between these providers

FTSE Index Structure
ftse etf index - global small cap all world global micro cap global all cap developed total cap emerging total cap frontier
Source: FTSE Russell, September 2019

Which MSCI and FTSE benchmarks are performing better?

ftse vs msci global geisac all world acwi emerging developed large mid small caps perfromance since 2003
Total Returns since 2003. Source: FTSE, MSCI, Bankeronwheels.com

Performance of different International segments is broadly similar:

  • The difference between both providers is negligeable in the long run
  • Your ETF Tracking Difference may be more important than the difference between MSCI and FTSE performance
  • If you select an ETF that tracks an index without small caps be cautious about allocation since small caps are much more volatile but shouldn’t be ignored since they add incremental returns
  • The same observation applies to Emerging Markets that can materially outperform developed markets during certain periods of time

What are the Best International ETFs?

Below are recommended ETFs based on your country – you can choose some ETFs that exclude your country so that you can allocate a different amount to your local Equity Market(s)

Summary of popular International ETF Benchmarks (MSCI)
msci acwi vs msci world
Summary of popular International ETF Benchmarks (FTSE)
popular international equity ETFs tracking FTSE Indices - summary

Should I take into account the ETF currency?

You can choose from other jurisdictions as well available with your broker but different regulatory treatment may apply (e.g. non UCITS Funds for Europeans) – currency of the ETF is not really an issue over the long term since the assets you invest in are denominated in local currencies

What if I’m in Europe and I buy USD Emerging Market ETF?

The intermediate currency between your currency (EUR) and the final assets (Emerging Market Currencies) has no effect whatsoever on returns to the investor who buys e.g. Emerging stocks. The stocks are priced in local currencies and on purchase, the investor exchanges some of their local currency for an equivalent value of ETF priced in USD, and on sale the reverse happens. 

In between purchase and sale, the investor holds only Emerging Market assets, so other currencies besides the investor’s own are irrelevant. If types of currencies are confusing, look here.


  • US
  • UK


If you want to hold all of your international equities in one fund (including US) look here for detailed review

There are ETFs that give you global ex-U.S. exposure (assuming you already invest in USA Markets separately) within a single ETF

Recommended ETFs:

  • MSCI ACWI IMI ex-US – iShares Core MSCI Total International Stock ETF (IXUS)
  • MSCI ACWI ex-US – iShares MSCI ACWI ex U.S. ETF (ACWX)
  • FTSE Global ex-US All Cap  – Vanguard Total International Stock ETF (VXUS)


Developed Markets:

  • FTSE Developed All Cap ex-US – Vanguard Developed Markets ETF (VEA)
  • FTSE Developed ex-US – Schwab International Equity ETF (SCHF)

Emerging Markets:

  • FTSE EM All Cap – Vanguard Emerging Markets ETF (VWO)
  • MSCI EM – iShares Emerging Markets ETF (EEM)
  • MSCI EM IMI – iShares Core (MSCI IMI) Emerging Markets ETF (IEMG)



If you want to hold all of your Global equities in one fund, there 6 UCITS ETFs that give you global exposure  within a single ETF

I have written extensively about this here


A separate section is available that lists BEST UCITS ETFs in each category – have a look!


If you want to hold all of your Global equities in one fund, there are 5 ETFs that give you global exposure  within a single ETF including the UK

I have written about this extensively here

If you want to exclude the UK, here is a good option:

  • FTSE All World – Xtrackers FTSE All-World ex UK UCITS ETF  (XDEX(excludes UK)


separate section is available that lists BEST UCITS ETFs in each category – have a look!

    What else should I know before buying an ETF?

    Click on the picture above to read more about all aspects of ETF Selection, including the most important – ETF Costs!


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    All information found here, including any ideas, opinions, views, predictions expressed or implied herein, are for informational, entertainment or educational purposes only and do not constitute financial advice. Consider the appropriateness of the information having regard to your objectives, financial situation and needs, and seek professional advice where appropriate. Read our full terms and conditions.


    The MSCI World Index captures large and mid-cap representation across 23 Developed Markets (DM) and covers 80% to 85% of market capitalization in each country.

    The MSCI ACWI captures large and mid cap representation across 23 Developed Markets (DM) and 26 Emerging Markets
    (EM) countries. It covers 80% to 85% of all market capitalization.

    FTSE All World Index captures Developed and Emerging Markets Large and Mid Sized Companies except Small Caps. This image shows how it differs from FTSE Global All Cap Index and other FTSE Indices like FTSE Emerging Markets and FTSE Developed Markets

    The providers classify Emerging Countries differently. For example, FTSE indexes classify South Korea or Poland as developed markets while MSCI considers them as emerging markets -FTSE includes more small caps in the Global Indices that include mostly Large and Mid Caps -They can treat China differently – MSCI has been feeding Chinese A-shares since June 2018 and increased the 5% cap over time. FTSE introduced these companies a year later and has a 5.5% cap at this time. Currently China is 40% of MSCI and 43% of FTSE (if we exclude Korea from MSCI these will be very similar)

    MSCI ACWI IMI captures Developed and Emerging Markets Large, Mid Sized and Small Caps. This image shows how it differs from MSCI ACWI and other MSCI Indices like MSCI World, MSCI Emerging Markets or MSCI World Small CAp

    MSCI EAFE is an Index for US Investors willing to invest in developed countries ex-US. MSCI World covers all developed countries including the US

    Both include Large and Mid Caps and do not include Small Caps.
    However, MSCI ACWI covers both Developed and Emerging Markets while MSCI World only covers Developed Markets

    FTSE All World captures Developed Markets and Emerging Markets for Large and Mid Caps.
    FTSE Global All Cap captures all Markets including Small Caps.

    Both capture only big and mid caps (smallest companies all left out)
    However, FTSE All World also includes Emerging Markets while Developed World doesn’t.

    Both capture only big and mid caps (smallest companies all left out)
    However, FTSE All World also includes Emerging Markets while MSCI World doesn’t

    Both include Developed and Emerging Markets
    However, FTSE All World leaves out the smallest caps while MSCI ACWI IMI includes them
    If you want to capture all caps with FTSE choose FTSE Global All Cap

    Both include Developed and Emerging Markets. However, MSCI ACWI IMI also includes small caps that MSCI ACWI leaves out


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    About Raph Antoine 77 Articles
    Raph Antoine is a Portfolio Manager and Institutional Advisor that witnessed first-hand the 2008 Global Financial Crisis and the 2011 European Debt Crisis working for some of the most prestigious names in the financial industry. Raph has experience across multiple asset classes including Fixed Income and Equity products as well as bespoke Investment vehicles in multiple jurisdictions. Raph holds an MSc in Financial Engineering and is a CFA (Chartered Financial Analyst) Charterholder. He usually rides one of his two bikes. Rarely, a Canyon Ultimate CF SLX 8.0 (that is currently in family's attic) and most of the time a Gravel Pinnacle Arkose (his favorite) that he used to Cycle the World.
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    1 year ago

    Thanks, this is useful. I just helped my mother (who lives in Belgium) rearrange her retirement savings, by selling all of her high-fee actively managed funds and buying into some ETFs. Within her equity holdings, we went for 90% FTSE Developed (ER of 0.12%) and 10% FTSE Emerging Markets (ER of 0.22%), since that seems to be somewhat cheaper than the one-fund solution of FTSE All World (ER of 0.22%), while still requiring only minimal rebalancing effort. I chose the 90/10 ratio based on the current split of VTWAX which puts around 10.4% in emerging markets (although I’m not sure… Read more »

    1 year ago

    Thank you for this! Learning a lot on why things are weighted the way they are. ?
    Also interested in following the economies with a low CAPE and investing in their index. (Korea was one with FLKR and EWY)

    1 year ago

    Thanks a lot, very useful insights. Currently I’m very heavy on S&P 500 but I have been thinking about transferring some funds to a FTSE All World ETF for a while. Your post just made me consider it seriously.

    1 year ago

    Interesting write-up, thanks. Any take on Solactive, the German low cost index providers? Some funds, like PRAW and ETLQ (Xetra) are using Solactive, and it seems to push the TER down, compared to (what I’m guessing is) the more expensive indexing options provided by FTSE and MSCI

    1 year ago

    Thank you for the excellent article, very helpful information. 

    I’m looking for diversification as almost 100% of my current portfolio are US stocks. If I understand correctly, an all world index ETF wouldn’t solve my problem as the majority of those indices are US equities. 

    Are there any “all world ex-US” ETFs around for non-US investors? (I’m from a smaller European country and therefore doesn’t have access to US ETFs)

    1 year ago
    Reply to  Raph Antoine


    Thanks for the answer.

    In the last few years I’ve started to build a dividend paying portfolio that’s why my current holdings are US stocks. It provides a nice growing cash flow so I’m not aiming to sell those.

    The main reasons I started to look at ETFs are diversification and to save the time which I spend on finding good individual companies.

    I’m considering adding STOXX Europe 600 and Emerging Markets ETFs to my holdings. Adding these to the individual US stock would cover most of the MSCI ACWI index without selling any of my current holdings.

    1 year ago
    Reply to  Raph Antoine

    Yes, that would exclude Japan while it was not my intention. I’ll consider the method you mentioned in your first answer.


    1 year ago

    [Long post alert] Thank you for this article, I have no idea how I’ve found this website, but glad I did! I have a very niche query which relates to Index funds vs ETFs; I just had a thought y’day where-in, I will pay platform charges to hold index funds with my provider (Cavendish Online for example), whereas I because of the rise of 0% commission platforms available in the UK such as Trading212 and Freetrade, I can effectively pay no platform charges to buy and hold an equivalent vanguard ETF, giving me a 0.25% discount on the platform charges,… Read more »

    1 year ago
    Reply to  Raph Antoine

    Thanks for getting back to me Raph,
    From the above, my interpretation of your text seems to be to (more-or-less) ignore the OCF and head straight for the KIID and look at the average deviation from the fund/ETF’s index? An average over the past 5 years should provide adequate confidence in making a firm decision?
    Am I also correct in thinking that this value would contain the OCF and ALL other fees not clearly disclosed within other documents?

    1 year ago
    Reply to  Raph Antoine

    Thanks Raph,
    I too, am surprised at how little coverage this point gets despite all the rage to go ‘as cheap as possible’ on trackers!

    Would keep my eyes peeled; Unfortunately, I do not get notifications through email for every new comment, so have to just keep checking every few hours.

    1 year ago

    Hi Raph
    Love your content – very useful when building your own portfolio!

    Jorge Cordeiro
    Jorge Cordeiro
    1 year ago

    Huge tips, thanks for helping me to understand the merits of having an ETF!! Before I only had stocks and now I’m currently going for Developed + Emerging!
    I do have one question – How one should now when to rebalance the % between dev and emerg?

    1 year ago

    Hi, Raph I did a little search between the 1st Vanguard FTSE All-World UCITS ETF (IE00B3RBWM25) and the 2nd Vanguard FTSE All-World UCITS ETF Accumulating (IE00BK5BQT80). I think the first option should be my choice, but I have a question about option 2. If it becomes an ETF over time, option 1 will become larger. What to do with the option in this case if it occupies 80 percent of my portfolio. For me, option 2 would also be acceptable due to dividend accumulating, which option 1 does not. But 1 is higher and TER -0.4 at least for now.… Read more »

    11 months ago

    Brilliant website!

    11 months ago

    Many thanks for the great article, I found it to be one of the best from a huge number of materials I came across. I understood the concept of having an overweight preference to a specific country / area like Emerging markets (since you can separate ETFs into EM, Developed ex US, US, etc), but how should one behave if I would like to be overweight in a specific sector or theme, like clean energy or AI for instance, or perhaps being overweight in a specific country like Russia, would it be possible to implement these themes in the global… Read more »

    10 months ago

    Hi Ralph, great post and very informative website! Do you have an idea why for example the 60/40 fund does not invest 60% in a global equity etf and 40% in a global bond etf but small percentages in different equity and bond etfs (that also seem to overlap)?

    Ante Kotromanovic
    Ante Kotromanovic
    7 months ago

    I can buy Developed+Em.markets (big cap and medium cap) ETF for 0,24% TER and I can buy Developed+Em.markets (all cap) ETF for 0,40% TER. Both ETFs satisfy all the criteria you mention.

    In your opinion, is 0,16% loss in TER worth the additional diversificatiom because small caps would be included?

    Antonio Barbagallo
    Antonio Barbagallo
    6 months ago

    I own the largest portion of my etfs on the s&p500 then I own two small portions on EM etf and Europe etf. Should I sell EM etf and buy msci world (develop and emerging) etf?