I’m looking at increasing my exposure to global small caps. Not too fussed about emerging markets as I have these covered already, but equally relaxed if a small cap ETF/tracker includes them. I’ve been looking at WSML (iShares MSCI World Small Cap ETF), which seems to fit the bill.
I think WSML is an excellent, almost perfect choice for that purpose. It is extremely diverse, directly on-theme for your interests, and cheap to own long term. It's large enough to avoid some mismanagement risk or quirky behaviour, or accidental capital gains event if outside an ISA (small ETFs are more likely to close randomly).
Global and sector weightings are good. It benefits from a little stock lending, it's ISA eligible, and it uses physical replication rather than synthetic/options (though notably, 'optimised' vs full direct holding. This might lead to some variation from the tracked index but probably is not so important).
Further, the bid-offer spread is extremely, extremely small. This makes it very cheap to purchase and efficient to rebalance. Finally, it trades frequently enough in the day to ensure there will be market makers/counterparties around to trade with. Likewise it should be supported by any major UK broker if you transfer your account around (interestingly, this is not true of all the largest iShares ETFs available in the UK).
In fact, WSML is already on my own long-term shopping list for these very reasons, at the right price. However, consider the chart (left side) here:
https://tinyurl.com/6yvab3wsLooking at the USD-value chart, the price of the average global small cap in WSML has jumped 2.5x in barely more than 1 year (in fact the bulk of the jump in barely 6 months). While that is wonderful news for those who were buying at $6600 (chart), it is less wonderful for new buyers at > $15000. (Chart figures were given using entire fund history and $10000 initially invested, not WSML ticker prices).
I do not think that small caps in the current economy are pointing towards such wonderful long-term prospects now, versus say late 2019, as their high price would seem to imply. A chunky part of future returns are already eaten and in the price. Might I suggest there may be some dangerous element of speculative mania at play and representing some part of the current price?
If you are buying, it may be worth waiting - or dripping in money over a year to ensure you get an 'average' price over some timeframe - particularly, to take into account the effects of e.g. economic stimulus being withdrawn, market mania perhaps fading a little.
This is not financial advice to you. Rather, simply describing how I would approach this ETF / situation myself in such unusual times. Take a look at the Macro board at my 'food for bears' post if you are curious about why I would be nervous to rush into this ETF (or any ETF) right now. In short a great choice but perhaps not the best moment in history to buy in, at least compared with any point prior to 12 months ago.
Good luck with your investment regardless of what you choose.
Finally you might enjoy these two excellent videos by Ben Felix.
https://www.youtube.com/watch?v=uErHwq4M6pghttps://www.youtube.com/watch?v=2MVSsVi1_e4comp