I like to write about ETFs as I have the majority of my stock portfolio in ETFs I find them a passive way to invest money and they don’t require much maintenance in terms of keeping track of stocks etc. However, one important question that needs to be addressed is which ETF to choose. In this article we are comparing two ETFs on one hand we have the Fidelity Global Quality Income UCITS ETF (FGQI) and on the other, we have the Vanguard All-World ETF (VWRL). In this article, we look at a comparison and my personal review related to these ETFs and how they stand against each other, through the lens of primarily a dividend investor. I also have an article dedicated to the Fidelity Global Quality Income UCITS ETF (FGQI) and the Vanguard All-World ETF (VWRL) separately.
Before we start we need to clarify what are exchange-traded funds, an exchange-traded fund is represented as a stock in the stock market so by holding this specific stock you are holding a basket of stocks that correspond to an index (portfolio benchmark) that is tracking.
The Fidelity Global Quality Income UCITS ETF (FGQI) can be categorized as a more income oriented approach for a global ETF while the Vanguard All-World ETF (VWRL) can be considered more of a general market ETF
The current benchmark/portfolio
Fidelity Global Quality Income UCITS ETF (FGQI)
The fund seeks to track the performance of the Fidelity Global Quality Income Index and is designed to reflect the performance of large and mid-capitalization companies from developed countries exhibiting high relative dividend yield and specified investment quality attributes, while retaining a broadly neutral industry sector position.
Vanguard All World ETF (VWRL)
The fund seeks to track the performance of the FTSE All-World Index. Generally, The index measures the market performance of large- and mid-capitalization stocks of companies located around the world. It would be good to investigate the benchmark in more detail and the methodology in more detail on their site.
FGQI currently holds about 228 stocks which provide more than plenty of diversification in my opinion. Regarding geographical diversification, this ETF provides diversification but with a high allocation to the U.S. with about 70% coming from the United States, and the rest is distributed to various parts of the world such as Japan at 6% and France at 4%. Overall I find it quite diversified as the United States is normally big in terms of companies that operate internationally and in this case it is 70% some may even think that it is quite low compared to investing in for example an S&P500 ETF. Nevertheless, it cant be denied that 70% in one country is high for a global ETF. While VWRL currently holds about 3600+ stocks. Regarding geographical diversification, this ETF provides plenty of diversification with about 58% coming from the United States, and the rest is distributed to various parts of the world such as Japan at 6% and the United Kingdom at 3%, Specially compared to FGQI.
Overall, I find both ETFs provide plenty of diversification in terms of total holding as the number of stocks under these ETFs is more than enough. While for the geographical diversification FGQI is heavily skewed to the United States compared to VWRL, which means VWRL provides better diversity, however it should be noted that top allocated companies in the U.S. have a lot of global exposure.
The top 10 holdings (FGQI)
Microsoft Corp. - 5%
Nvidia Corp. - 5%
Apple Inc. - 5%
Eli Lilly and Co -1%
Broadcom Inc - 1%
Verizon Communications Inc - 1%
ASML Holding NV- 1%
Visa Inc. - 1%
Novo Nordisk A/S - 1%
Comcast Corp - 1%
When looking at ETFs I find it crucial to have a look at the top 10 holdings to get a good feeling of the ETF and to see if it fits my profile and to see if these would be companies I would invest myself in individually. In this case, the top 10 holdings for FGQI are representing almost 20% of the total holdings which does not necessarily give the best overview, however, this is to be expected with more than 200 holdings.
The top 10 holdings (VWRL)
Microsoft Corp. - 4%
Apple Inc. - 3%
Nvidia Corp. - 3%
Amazon inc. - 2%
Alphabet Inc. Class A - 1%
Alphabet Inc. Class C - 1%
Facebook Inc. - 1%
Eli Lilly and Co -1%
Taiwan Semiconductor Manufacturing Co. Ltd.- 1%
Broadcom Inc - 1%
In this case, the top 10 holdings for VWRL are representing almost 18% of the total holdings which does not necessarily give the best overview, however, this is to be expected with more than 3000 holdings.
We can see that FGQI is indeed focused more on dividend stocks while the top 3 stocks are making almost 15% of the ETF which can be seen as a little risky which are similar stocks to VWRL but VWRL have a slighlty lower allocation.
It is also important and interesting to look at sector diversification as it provides a good idea of how this fund is allocated through various sectors.
The top 5 sectors FGQI
Technology - 25%
Financials - 16%
Health Care - 12%
Industrials - 12%
Consumer discretionary- 11%
The top 5 sectors VWRL
Technology -24%
Financials - 14%
Consumer discretionary- 10%
Industrials - 10%
Health Care - 10%
For my personal taste, FGQI has just a bit too much exposure to financials and could definitely be lower at about 10%, and in the top 5, I am missing consumer staples. However, there is not too much to complain about as both follow overall market trends, however some may see the technology allocation as a bit too high.
Expense Ratio
When it comes to the expense ratio, the lower the better and I would generally like to see an expense ratio below 0.5%. Overall in Europe, I find the ETFs available a bit more expensive than what is available in the United States. In this case, the FGQI ETF has an expense ratio of 0.4% Which for me is not very low but also not too high. The All-World ETF has an expense ratio of 0.22% which is better overall.
However, FGQI is more of a specialized ETF compared to VWRL. One thing to keep in mind is that these are both world ETFs, meaning they are nicely spread around the world and this may be one of the reasons why they are this expensive bundled with the total amount of holdings. I would personally prefer to have fewer holdings for a lower expense ratio as this will affect the overall performance in the Long term.
Performance
I want to look at the total return for both the capital appreciation and dividend.
Looking at the total appreciation (in EUR) in the last 5 years FGQI has increased over 79%, while VWRL has increased about 76% However, looking at a longer period these funds have performed better than this.
The starting dividend yield at the time of writing is 2.5% for FGQI. For VWRL The starting dividend yield at the time of writing is 1.6% . Based on this information, I conclude that there was a decent return and FGQI is currently offering a higher yield which may be interesting for income, while still providing similar and even better returns then VWRL, which is a bit surprising considering the higher expense ratio and lack of focus on growth companies. In terms of dividend growth FGQI has performed well as well from payout of 0.15 EUR in 2020 to 0.21 as of 2024, this is all based on past data so there are no guarantees.
Conclusion
In conclusion, both the Vanguard All-World ETF (VWRL/VWCE) and the Fidelity Global Quality Income UCITS ETF (FGQI) offer robust options for global exposure, each catering to different investment strategies. VWRL/VWCE provides a comprehensive, diversified approach across developed and emerging markets, making it an excellent choice for investors seeking broad market coverage with a long-term growth perspective. On the other hand, FGQI stands out for those prioritizing income generation, focusing on high-quality companies with sustainable dividends.
FGQI is looking to balance global diversification with an income-oriented strategy, and offers a compelling option. Its emphasis on quality stocks with reliable dividend payouts can provide a steady income stream, which is particularly attractive in volatile markets. Meanwhile, VWRL/VWCE remains a solid foundation for those aiming for broad market exposure with the potential for capital appreciation with some dividend income.
Ultimately, the choice between VWRL/VWCE and FGQI depends on individual investment goals and risk tolerance. Combining elements from both ETFs could also be a strategic approach to achieve a well-rounded, resilient portfolio, which is what I am doing myself. By understanding the distinct benefits each ETF offers, one can better align their investment choices with their financial objectives, ensuring a balanced approach to global investing.
Disclaimer: I am not a financial advisor, this blog is centered around my opinion and should not be viewed as legal, professional, or financial advice. For me, it's crucial to supplement my knowledge with resources like videos, articles, and books to deepen my understanding of investing principles and strategies.
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