World ETFs: A Solid Foundation in Times of Crisis?
World ETFs provide investors with a good opportunity to survive stock market crises through their broad diversification across different countries, industries, and companies. The diversification allows losses in certain segments to be offset by gains or stability in other areas.
The Limits of World ETFs
Although World ETFs offer many advantages, they are not immune to sharp market declines and crisis phases. Historical examples, such as the Templeton Growth Fund during the global economic crisis from 1973 to 1975, show that even conservatively managed funds can suffer significant losses. The fund lost about 40% of its value during this crisis.
The Relevance and Strategy of World ETFs
World ETFs provide a simple means of diversification – both geographically and across sectors. In times of crisis, this reduces the risk of individual failures. However, this broad distribution does not completely protect against losses. Instead, it spreads the risk and helps achieve more stable long-term returns.
Important Considerations for Investors
- Broad Diversification: World ETFs reduce the risk of individual markets or sectors.
- Not Crisis-Proof: Even these ETFs can lose significant value during stock market crashes.
- Long-Term Strategy: A long investment horizon and psychological preparation for fluctuations are crucial.
- Selecting high-quality ETFs with global distribution can help take advantage of opportunities in various markets and minimize risks.
Investors in World ETFs are well diversified for stock market crises – however, complete protection against losses does not exist. Realistic expectations regarding volatility and a long-term investment horizon are essential.