2018 was a mixed year for investors around the world as stock markets plunged on trade concerns towards the end of the year.
However, in 2019, markets roared back with some of the world’s stock indexes producing returns of more than 20% for investors, making it one of the best years on record in terms of performance.
Following this performance, I think 2020 is going to be another good year for investors around the world. With this being the case, if I had £1,000 to invest today, I would put my money to work in a low-cost global stock tracker fund.
A global investment
A global stock tracker fund is a great way to get exposure to the world stock markets without taking too much risk. Picking single stocks can be a time-consuming and confusing process, and £1,000 isn’t enough to build a diversified portfolio of individual stocks, especially when you take into account trading charges.
What’s more, even picking individual stock markets can be tricky. For example, last year, Britain’s leading blue-chip stock index jumped 12%. However, the S&P 500 index of top US companies surged by 28% and the MSCI World Index, which tracks stocks across the developed world, jumped by almost 24% during 2019.
The best way to get exposure to global stock markets is, in my opinion, to buy the FTSE All-World UCITS ETF. Offered and managed by global fund powerhouse Vanguard, the All-World ETF owns a total of 3,371 stocks and charges an annual management fee of 0.22%.
One thing to note about this fund is the fact that its base currency is US dollars, so there’s quite a lot of currency exposure here, which can have a significant impact on returns.
If you are not comfortable with this kind of exposure, then the iShares MSCI World GBP Hedged UCITS ETF is a great alternative. The difference between this fund and its peer is the fact that the iShares offering hedges its currency exposure back to sterling, so investors don’t have to worry about foreign currency risk.
It is a bit more expensive, with an annual management fee of 0.55%, but this is relatively inexpensive considering the peace of mind that currency hedging offers.
Over the past five years, this fund has returned 7.4% per annum including fees, and it has compounded investors’ capital at an annual rate of 9.8% since inception. At this rate of return, it will take around seven years to double your initial investment.
The bottom line
So, that’s how I would invest £1,000 in 2020. While this might not be the most exciting investment strategy around, I believe that buying a low-cost global tracker fund means investors can gain exposure to global markets without having to worry too much about picking stocks or countries.
All you need to do is click ‘buy’ then sit back, relax and watch your money grow. It is as easy as that.
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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2020