Global Portfolio Diversification: Choosing Between ACWX's International Exposure and URTH's Developed Markets Blend

When building a portfolio that diversifies across global markets, investors face meaningful choices between tools designed with different strategies in mind. The iShares MSCI World ETF (URTH) and iShares MSCI ACWI ex US ETF (ACWX) represent two distinct approaches to international investing—each with different cost structures, income profiles, risk characteristics, and geographic focuses. Understanding how these two funds work can help you construct a diversification framework aligned with your investment goals.

Understanding the Cost and Income Trade-off

The most immediate difference between these two ETFs shows up in their fee structures and dividend distributions. ACWX charges 0.32% annually while URTH costs 0.24%, making ACWX the more expensive option. However, ACWX compensates for this higher fee through a substantially higher dividend yield of 2.83% compared to URTH’s 1.5%.

For income-focused investors willing to absorb the additional 8 basis points in costs, ACWX’s meaningful yield advantage can justify the expense ratio differential. Over a year through January 9, 2026, both funds showed strong performance—URTH returned 23.08% while ACWX surged ahead with 35.9%, suggesting that ACWX’s tax-advantaged income plus capital appreciation created a compelling return profile during this period.

As of early 2026, both funds maintain substantial asset bases (URTH at $6.74 billion and ACWX at $7.87 billion), indicating investor confidence and healthy liquidity for trading.

Risk Profile and Long-term Growth Comparison

When examining risk and returns over a five-year horizon, the two funds reveal distinct volatility patterns. URTH experienced a maximum drawdown of -26.06%, while ACWX’s worst peak-to-trough decline reached -30.06%, showing that ACWX endured greater volatility during downturns. This risk differential becomes clearer when examining cumulative growth: a $1,000 investment in URTH five years ago would have grown to approximately $1,644, while the same amount in ACWX would have reached only $1,251.

This performance gap suggests that despite ACWX’s impressive recent outperformance, URTH’s historically more stable trajectory and higher absolute returns over the longer term make it the stronger growth engine. The divergence highlights how geographic and sector positioning influences not just returns but also the journey investors take to reach their goals.

Portfolio Construction: Where the Holdings Diverge

The fundamental distinction between these funds stems from their geographic mandates and resulting portfolio compositions. ACWX invests exclusively in non-U.S. equities, holding approximately 1,751 companies from both developed and emerging markets. Its largest positions include Taiwan Semiconductor Manufacturing, Tencent Holdings, and ASML, reflecting a portfolio tilted toward technology (15% of assets), financial services (25%), and industrials (15%).

By contrast, URTH provides exposure to 1,319 developed market stocks worldwide but concentrates heavily in U.S. companies and particularly U.S. technology firms. Nvidia, Apple, and Microsoft represent its three largest holdings, with technology comprising 26% of the fund and financial services at 17%.

The strategic implication is clear: if you seek to diversify away from U.S. equity dominance and want meaningful exposure to Asian and European companies, ACWX positions you outside American markets entirely. If you want broad global coverage that still tilts toward the developed world’s largest economy, URTH captures that blend, including the mega-cap tech names that have driven market returns in recent years.

What’s Driving Recent Performance Divergence

ACWX’s 1,200 basis-point advantage over URTH during the trailing twelve months stems partly from its concentrated bets in specific Asian holdings. Taiwan Semiconductor Manufacturing, a core ACWX position, climbed 45% over the same period, while Tencent Holdings gained 56%. These gains reflect both the recovery in semiconductor demand and growing valuations in Chinese technology firms—dynamics that URTH’s heavier U.S. tech weighting simply doesn’t capture to the same degree.

The recent outperformance of ACWX shouldn’t obscure its longer-term volatility or the fact that URTH’s more stable architecture delivered superior total returns over the five-year measured period. This underscores a timeless investment principle: recent winners don’t always maintain their advantages.

Selecting Your Diversification Strategy

Choosing between these funds depends on your portfolio context and objectives.

Choose ACWX if you: already have substantial U.S. equity exposure elsewhere and want to diversify genuinely outside America. You’re comfortable with higher short-term volatility in exchange for meaningful dividend income and exposure to emerging markets. You believe non-U.S. equities offer better value or growth prospects than American markets.

Choose URTH if you: want a single fund providing true global exposure but don’t mind heavy U.S. weighting. You prefer the stability and long-term growth profile that comes with developed markets. You desire lower costs (8 basis points matter over decades) and want the benefit of mega-cap U.S. technology exposure without holding these stocks individually.

An important consideration: both funds hold companies vulnerable to tariff headwinds and trade policy shifts. However, URTH’s inclusion of U.S.-domiciled companies may offer some protective diversification against aggressive trade policies that could disproportionately impact non-U.S. exporters.

Beyond the Comparison

Whether your strategy emphasizes ACWX’s income orientation and geographic diversification or URTH’s growth trajectory and developed-market stability, both funds serve legitimate roles in a diversified portfolio. Some investors might own both, using URTH as a core developed-markets holding and ACWX as a complementary position targeting non-U.S. opportunities.

The key is matching each fund’s characteristics to your broader investment goals rather than chasing recent performance trends. Building a portfolio that can weather different market environments requires thoughtful diversification across both geography and strategy—exactly what comparing tools like these allows you to accomplish.

Data as of January 9, 2026. Past performance does not guarantee future results. Consider consulting a financial advisor before making investment decisions.