VWRL vs IWDA: Which is Better for European Investors?

Today I want to discuss two pretty good ETFs (exchange-traded funds) that European index investors seem to love. We’re going to try to determine which fund is the better investment, by looking at things like fees, dividends, liquidity, and management. VWRL vs IWDA: Let the showdown begin!

This article is not intended to give financial advice. You are responsible for your actions, regardless of whether they result in profit or loss. Always do your own research before investing your money. I am not liable for any losses suffered as a result of actions you take.

Why Index Fund ETFs Are Your Best Bet

The reason ETFs work brilliantly to invest in indexes while keeping costs low is that there is no active management. Fund managers that are actively trading stocks want to earn high salaries and therefore drive up the costs of your investments. Also, they incur even more (transaction) costs by buying and selling a lot of shares.

Passive index funds, on the other hand, are super cheap. Index funds offer low cost investing by having one fund manager manage a lot of capital without trying to actively trade and beat the market.

Therefore, they save on fund management costs and transaction costs, which results in higher investment returns for you.

Read about my investment strategy here.

Diversification is the Only Free Lunch in Finance

Next to costs, index funds or index tracking ETFs offer another upside to investors. Usually they’re better diversified than actively managed funds, which should hopefully result in less volatile investments.

Diversification exposes you to a lot of different stocks, so that if any one of them fail you don’t feel the pain. On the other hand, it also prevents you from seeing massive gains, but that might be a good thing for people looking for stability.

Anyway, index funds and ETFs offer an easy way to diversify your investing into thousands of companies without doing any work yourself. Just buy the ETF with DeGiro and you’re done.

VTI and VXUS Are Not Available Anymore

Since the introduction of the PRIIPS regulation in the European Union last year, it has become impossible to invest in investment products that don’t provide documentation in your native language.

Before this EU wide regulation, I like to invest in ETFs called VTI and VXUS. These ETFs invested respectively in the US total stock market index and the total world ex-US index.

Because the documentation on these funds is only available in English, and The Netherlands is too small a country for Vanguard to provide documentation in Dutch, we can’t buy VTI and VXUS anymore here. Such a shame…

The alternatives are two ETFs called VWRL and IWDA. They’re created by Vanguard and iShares and both track the entire world’s equity market. So which of these trackers should you invest in?

VWRL vs IWDA Which Should You Choose?

Let me give you some pros and cons of both index tracker ETFs. I’ll discuss fees, fund size, liquidity, share price, dividend policy, management companies, and whether you can execute free trades on DeGiro.

Overview of VWRL and IWDA

IWDA is an exchange-traded fund that aims to track an index of large-cap companies in developed countries. VWRL, on the other hand, tries to follow companies in both developed and developing countries.

Comparing Fees and Costs for VWRL and IWDA

The Total Expense Ratio, or TER, of both funds is very similar. They’re not as cheap as some of the American funds, but they’re definitely cheap enough to be considered by index investors.

VWRL has an ongoing TER of 0.25% whereas IWDA costs 0.20%. This makes them both pretty fit to be used by individuals perusing FIRE since we know that costs have a large impact on performance.

Because it’s cheaper, IWDA wins this round.

VWRL Fund Size vs IWDA

Both funds are rather large. VWRL has 2.7 billion dollars in assets under management, but IWDA wins this one easily. An incredible 20 billion USD is invested in this ETF.

The reason fund size is important is that more money in the fund usually means it’s more liquid. And liquidity is key, especially if you’re looking to divest out of the funds.

IWDA gets the point for fund size.

Number of Investments

VWRL invests in 3,265 companies, and IWDA invests only in 1,654 companies

Since I like to be diversified, this one goes to VWRL.

VWRL and IWDA Diversification

The diversification is more than just the number of companies an index fund invests in. I also want to invest in the entire world’s economy.

When I choose VWRL, I am investing in large and mid-cap companies from all over the world. It includes both developed and developing countries and that makes it easy for me to be exposed to the entire world. This is probably the reason its TER is a bit higher than IWDA’s.

IWDA doesn’t have this diversification, since it only invests in large-cap companies from developed countries.

Therefore, I have to let VWRL win this one too.

Liquidity is Key When Investing in ETFs

Liquidity is super important. That’s because with illiquid funds, there may be large spreads between the bid and asks (buy and sell) prices. The more liquid a fund is, the closer these prices are and the less money you lose when you trade the fund.

Also, larger funds tend to be easier to buy and sell, as more investors place buy and sell orders there will always be a party to match your order.

Even though IWDA is much bigger than VWRL, I think this is a draw. VWRL is large enough that it is liquid for buy-and-hold investors like myself.

Price of VWRL vs IWDA

Usually I would be the first to mention that price is not important, but value is. The price is a function of the total asset value divided by the number of outstanding shares, so price alone tells you nothing. I mean, if you don’t know the number of shares, it doesn’t matter whether the price is 5 euros or 500 euros, it could mean the same if the latter has a 100 times less shares outstanding.

However, in this case, price does matter. Since we individual investors don’t have unlimited amounts of capital to deploy, I would say that assets with lower prices are more attractive. This is because of a phenomenon called cash drag.

The more money I have sitting in my account doing nothing, the more potential I lose by not being invested. Say I start investing 100 euros per month, I could buy almost 2 shares of IWDA every month at current prices but only 1 share of VWRL.

With larger portfolios this effect quickly fades, but for beginning investors it might make sense to invest in IWDA to prevent much cash sitting on the sideline.

IWDA wins this one.

Distributing or Accumulating ETF?

For some investors it might make sense to invest in either distributing or accumulating funds. For Dutch investors like me it doesn’t matter, we pay the same amount of tax on dividends and capital gains.

A distributing funds pays out the cash dividends received from the underlying assets to its shareholders. They can then decide to reinvest or use this cash. VWRL is a distributing fund.

An accumulating fund does not pay out dividends. It keeps the money in the fund to buy additional underlying assets, making your ETF shares more valuable. IWDA is an accumulating fund.

In both cases, the total return is the same. Basically, taxation is the only reason you have to choose one or the other. For me, it doesn’t matter in this VWRL vs IWDA comparison, so this one is a draw.

Management: Vanguard vs iShares (BlackRock)

VWRL is managed by Vanguard, the grandfather of the index fund. IWDA is managed by iShares, a product by asset management company BlackRock.

Both companies (Vanguard and BlackRock) are very large, respected companies. However, because Vanguard was the first company to create cheap index funds I like them.

Also, Vanguard is practically a non-profit organisation, where profits from its operations are paid back to the investors.

For these reasons, I’ll have to give this one to VWRL.

Which is Better, VWRL or IWDA?

If we tally up the scores from the topics above, we see that IWDA gets the lead on three topics, and VWRL wins out on three topics too.

We can draw the conclusion that both funds are very good and both are a good choice to invest in for the long term. I don’t think you can lose if you keep investing for the long term and keep holding on. But as with everything in investments, things can go wrong. Don’t assume you will make a profit from investing in these two funds.

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14 thoughts on “VWRL vs IWDA: Which is Better for European Investors?”

  1. Hey! I live in Ireland and have a Degiro account in Ireland. Should I buy IWDA on the LSE or the EAM?? Thank you in advance

    1. I don’t give financial advice, but what I would do is invest through the exchange that offers the fund you want in the currency you invest in. For the return it doesn’t matter, but there might be fx fees you pay when converting currencies.
      Thanks for stopping by!

  2. Thanks, great article.

    Situation: I hold VWRL in an account at DeGiro in the Netherlands.
    But I don’t pay taxes in the Netherlands.
    Therefore I cannot deduct the 15% dividend tax from my Dutch tax form, and I end up paying it. Since VWRL pays 2% dividend tax, I’m losing 15% * 2% = 0.30% extra on the portfolio. Adding VWRL’s TER I’m paying an 0.52% effective expense ratio.

    Conclusion: In this case it would be better to switch over to IWDA+EMIM, because both of them are accumulating dividends so I will no longer have to pay dividend tax, and I lower my portfolio’s effective expense ratio to ~0.19%. EMIM has low transaction fees at DeGiro but IWDA is free.

    Question: Does this seem correct to you? Am I missing something?

  3. As an investor having already bought an iwda+emim etfs and want to change to vwra/vwce should she/he sell first the iwda+emim portfolio and buy vwce/vwra etf or buy first the vwra/vwce?

    1. Hi Daniel, I don’t give advice on how to invest and which funds to buy. I can just speak about my own experiences and thoughts.
      In your case, I think you need the money that’s now locked up in the old funds to invest in the new ones, right? Or maybe you want to keep the old funds, in that case it doesn’t matter.
      Thanks for stopping by!

  4. Thanks for writing this article.

    I checked the funds on morningstar and noted that, while VWRL invests in developing markets, perhaps not significantly more than IWDA – depending on your definition of significant, of course. Both funds have about 5% equity allocated in Europe. IWDA allocates 67% in the Americas and 13% in Asia. VWRL has 59% in the Americas and 21% in Asia – swing (and difference for comparison) of 8%.

    Across stock sectors, both funds have an approximate split of 30/40/30 across cyclical, sensitive and defensive stocks, with VWRL being slightly more cyclical and less defensive (4% swing).

    A few other points of comparison:

    Morning Star awards a 5 star rating to IWDA and a 4 star rating to VWRL.

    Both have a “below average” risk profile.

    An investor looking to seek exposure to emerging markets would perhaps look to utilize IWDA and also another fund, such as EIMI, to do that. Or, alternatively, VWRL might be a suitable one stop shop.

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  6. To your point “Because the documentation on these funds is only available in English, and The Netherlands is too small a country for Vanguard to provide documentation in Dutch, we can’t buy VTI and VXUS anymore here. Such a shame… ”

    Why isn’t using the Irish site of DeGiro an option to invest?
    I’m using the .ie site for the English interface and I wonder if I’m missing something.

      1. I’m an EU citizen living in The Netherlands. I don’t really speak Dutch so I’ve signed up on degiro.ie. Used my Dutch tax id (BSN), all worked fine.

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  8. It’s good that you explain what kind of different etf’s there are for retail investors. VWRL and IWDA are interesting funds as they are not tied to any particular country or region. Most of my mutual funds are based on 1 country or continent.

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