I’m a big fan of index investing in general, and the VWRL fund in particular. Currently, I’m not looking to maximize my dividend income. Rather, I focus on getting an optimized total return. And that is exactly what VWRL offers: it tracks the world economy by investing in about 3,500 different companies around the globe.
Index Funds vs Individual Stocks
I have written a lot about why I invest in index funds or index-tracking ETFs, rather than picking stocks. I think it’s not worth my time investing in individual stocks, plus, who says I can do better than the market? Please, let me follow the entire stock market and I’m happy.
VWRL is an example of an index fund, in the form of an ETF. That means it’s passively managed by the fund manager (Vanguard) and that keeps costs low.
VWRL costs only 0.22% in total expense ratio. That means that for every 10,000 euros you have invested in VWRL, you pay Vanguard a minimal 22 EUR per year to manage that money for you. And you won’t even notice it because these costs are taken from the fund, not your bank account.
How does VWRL work?
Well, that’s quite complicated, but let me make it easy for you.
When you buy a share in VWRL, your money is invested in all companies in the FTSE All World index. This index tracks about 3,500 companies in both developed and developing countries, in USD, in EUR, in Yen, you name it. If a recession hits the banking sector, you’re also invested in automotive. If the Japanese economy stays flat, you’re also in the US and Europe.
You could lose money
It’s almost as if you cannot lose. That’s the beauty of this index fund. You cannot lose. Well, let me correct that for you. You can lose money, for sure. Investing is not without risks and even index funds can lose value.
The current Corona crisis (2020) is a great example of that. Between the end of February and the end of March VWRL lost more than 30% of its value. That means that if you bought at the height of the market and then sold at the absolute low, you would have lost 30% of your money.
But please don’t do that. I cannot advise you on how to invest, I can just tell you I personally would not sell when the market is tanking.
But you can also Win Big
VWRL is tracking the world economy. Let that sink in. When the world is going through a world-wide crisis, then yes your stocks might be worth less. But in the long term, if you believe we as human beings can invent and improve and make things awesome, then we cannot do wrong. Probably. I don’t have a crystal ball.
So if the companies in the FTSE All World index are doing just fine, you will be doing just fine. Maybe not from day to day, but in the next decades or so. VWRL – in my eyes – is a long-term investment.
So how can you make money investing in VWRL? Let’s investigate how you can make money when the ETF price increases and when VWRL pays dividends (which they do!).
Capital gains make you money
The idea is that the companies in the FTSE All World index make money. If they are profitable, they tend to either pay out their profits to you (the shareholder), or keep it in the business to grow (in which case, the company is worth more and your shares are worth more).
So you can make money when the companies that are in VWRL are growing. If they grow, their stock prices grow. And because you own shares in a fund that owns all of these shares, your ETF price increases and with that your net worth!
The only problem is, you can’t do anything with that increased share price. But, when you need the money, you can sell some of your precious pieces and realize your profit.
Another way you can make money by investing in VWRL is because they own companies that pay out dividends.
However, if you are looking at dividend investing, VWRL might be something to investigate. This particular fund is in no way a specialized dividend ETF, but it does pay dividends.
If you want to know more about dividend investing at my favourite broker, DEGIRO, then read my post about dividend investing with DEGIRO.
So in this post I want to look at how dividend payments work, when they occur (payment dates for 2019) and the average dividend yield for VWRL.
How Does VWRL Pay Out Dividend?
VWRL is an ETF that invests in thousands of stocks. It doesn’t track dividend paying stocks in particular, but rather contains a broad mix of both value and income stocks.
The stocks that are part of the VWRL fund might pay a dividend. When this happens is up to the individual companies. So Vanguard (the company that manages VWRL) might receive dividend payments every month, from lots of different companies.
VWRL is a distributing fund, meaning it pays out the dividends received from its holdings. These dividends are paid out quarterly to shareholders.
VWRL Dividend Payments Schedule
In 2019, VWRL already paid out all of its dividends. Mind you, the first payment of the year is paid out over the last quarter of the previous year. Why you ask?
This is because Vanguard announces dividends around the last week of the quarter, and then pays out two weeks later – just in the next quarter.
For 2020, the announcement dates are;
- 19 March
- 4 June
- 17 September
- 10 December
However, these dates are just the dividend announcement date. On these dates, it will be clear how much dividend VWRL will pay the next quarter.
What matters more to investors are the ex-dividend date and the payout date. The ex-dividend date is the cut-off date. You need to own VWRL shares before this date to be eligible to receive dividends.
The ex-dates for 2020 are:
- 26 March
- 11 June
- 24 September
- 17 December
You should try and make sure to buy your VWRL before these dates, in order to receive the quarterly dividend. Now I understand that for 2019, this doesn’t matter much, since there’s only one quarter to go. However, for 2020 these dates will probably be close.
Then the last important date for VWRL investors is the payout date. This is the date Vanguard actually credits your investment account with the dividend payment. For 2020 these dates are:
- 8 April
- 24 June
- 7 October
- 30 December
Dividend Yield from VWRL
As we speak (November 2019), VWRL yields approximately 2.1% annually. This is pretty decent for a fund that aims to track the world economy, and not just dividend stocks!
For every 1,000 euros of VWRL you own, you might receive around 21 euros per year (5 euros per quarter) in dividends.
Of course dividends are anything but guaranteed, but still. Compare a 2.1% dividend yield to the pathetic 0.1% interest you might get with a savings account, and you’re doing pretty well.
Now, if you are specifically looking for dividend paying stocks, VWRL might not be for you. Just over 2% might not be enough. However, if you want to diversify your portfolio VWRL could be a potential candidate. You will own thousands of shares instantly and make some dividend income!
What Are The Long-Term VWRL Returns?
Everything above is all nice, but what would you have made in VWRL if you had invested in it years ago?
That’s always difficult to say, because we don’t know when you invested, and whether it was a lump sum investment or you invested monthly.
But let’s say this. If you had put in 1,000 euros in 2013 when the fund started, it would be worth about 1,950 euros today (according to this Morningstar page). And yes, that’s including the Corona crash of 30%. Before Corona, it would have been about 2,100 euros.
That means that VWRL returns have been (back of the envelope math, not perfect) over 8.3%. That’s in a bull market, sure, but also during one of the worst market conditions of recent history!
Not bad, not bad!
It definitely beats a savings account, now doesn’t it?
I think I have mentioned most subjects around VWRL. Let’s quickly go through a few other things I’d like to say.
Where to Buy VWRL?
At most brokers, I think. I always buy VWRL with DEGIRO. That’s an online broker I use for all of my stock investments and I love them for their great platform and low fees.
I have written about how you can invest in VWRL using DEGIRO in this article. You can sign-up for DEGIRO using my affiliate link (which helps me run this site), but also feel free to invest using other brokers such as Flatex, Lynx, Interactive Brokers, Binck, and more!
Which Companies are in VWRL?
Too many to write down, actually! The biggest ones (in March 2020) are:
- Alphabet (Google’s parent)
VWRL uses a market weight index, which means that bigger companies make up a larger share of the index. For example, Microsoft and Apple together are more than 5% of the VWRL value. Smaller companies make up much less.
Twice per year Vanguard re-weighs the index.
Are There Alternatives to VWRL?
Oh yes, there are plenty alternatives! One that comes to mind is IWDA, a very large index-tracking fund that tracks large companies in the developed countries, so it is a little bit less diversified than VWRL.
However, it’s a very good, well-respected fund that I would definitely have no problem investing in. If you’re not sure you want to invest in VWRL, check out this comparison between VWRL and IWDA!