Definition
The World Equity Benchmark Series (WEBS) refers to a type of Exchange Traded Fund (ETF) that tracks specific foreign stock markets. Each WEBS ETF represents a single country’s most significant and liquid stocks. They are designed to replicate the investment performance of these specific countries’ equity markets.
Phonetic
World Equity Benchmark Series: /wɜrld ˈiːkwᵻti bɛnʧmɑrk ˈsɪəriːz/ WEBS: /wɛbz/
Key Takeaways
- Broad Market Exposure: World Equity Benchmark Series (WEBS) provides investors a comprehensive exposure to international equity markets. WEBS offers a cost-effective way to diversify an investor’s portfolio across various international market segments.
- Access to Different Countries: WEBS provides access to equity markets of various developed and developing countries. This allows investors to participate in other countries’ economic growth, which might be difficult to access normally.
- Risk Management: By providing exposure to various global markets, WEBS can help manage geopolitical risk and economic uncertainties. It allows investors to spread their investments across different economies, reducing the risk of concentrating investments in a single market.
Importance
The World Equity Benchmark Series (WEBS) is an important term in business and finance because it refers to a type of exchange-traded fund (ETF) that allows investors to invest in stocks from specific countries, specifically emerging markets. These funds track various country-specific Morgan Stanley Capital International (MSCI) Indexes, offering investors a method of diversifying their portfolio on an international scale. This globalization of a portfolio can provide additional growth opportunities and hedge against domestic market downturns. Thus, WEBS play a crucial role in facilitating global investing and enhancing the risk-reward balance in an investor’s portfolio.
Explanation
The World Equity Benchmark Series (WEBS) is a selection of exchange-traded funds (ETFs) that are primarily used as a tool for investors to gain exposure to international indices in specific countries. These ETFs can track equity market performance of emerging and developed economies around the world. As such, they provide a convenient way for investors to diversify their portfolios across numerous countries, reducing dependence on the economic performance of a single nation.Towards that purpose, WEBS are used as a vehicle to invest in a basket of shares representative of a particular country’s stock market index. This allows investors to bet on the performance of that entire economy without having to buy each individual stock. Consequently, WEBS can be effective in risk management, facilitating geographic diversification, and capturing potential growth from different markets. WEBS are also useful for institutional investors and fund managers who wish to hedge against international risks.
Examples
1. iShares MSCI: iShares MSCI is an example of a WEBS. It’s a series of ETFs (exchange-traded funds) managed by BlackRock that track the performance of equity markets in various countries around the world. These individual ETFs correspond to different countries including Canada, Australia, Germany and more. 2. Vanguard Total International Stock ETF: This ETF seeks to track the performance of the MSCI All Country World ex USA Investable Market Index, an index of stocks from developed and emerging markets worldwide, excluding the United States. With this index, investors have a WEBS that allows them to spread risk across a broad selection of equity markets in one investment.3. Emerging Markets Index Fund: This global fund, which could be run by businesses like Fidelity or Vanguard, offers a WEBS that provides exposure to a wide range of emerging market countries. It aims to replicate the performance of the equity markets in these regions, providing a broad exposure for investors who are interested in participating in these markets.
Frequently Asked Questions(FAQ)
What is World Equity Benchmark Series (WEBS)?
World Equity Benchmark Series (WEBS) are a type of exchange-traded fund designed to track the performance of specific foreign markets. Created by Morgan Stanley in the 1990s, they were the precursor to what are now called iShares.
How do WEBS work?
WEBS work by tracking specific indices in foreign markets, letting investors gain exposure to these markets without needing to buy shares in foreign companies directly. They are traded on exchanges just like stocks.
What types of markets do WEBS cover?
Originally, WEBS covered 17 different nations, including many in Europe and Asia. However, after transitioning into iShares, the range of markets covered has since expanded to include nearly every significant economy in the world.
What are the advantages of investing in WEBS?
WEBS allow investors to diversify their portfolios by gaining exposure to international markets. They also provide the convenience of investing in foreign markets without having to trade directly in foreign stock exchanges.
What risks are associated with investing in WEBS?
Investing in WEBS carries risks similar to investing in foreign markets, such as currency risk, political risk, and economic risk. The performance of WEBS depends on the performance of the underlying foreign indices they track.
What happened to WEBS? Why are they now called iShares?
In the late 1990s, Barclays Global Investors acquired the WEBS product and re-branded them as iShares, which are now one of the most popular types of exchange-traded funds globally.
Do I need a special type of brokerage account to invest in WEBS?
No, you can invest in WEBS, now iShares, via a standard brokerage account, the same way you would purchase individual stocks or other types of exchange-traded funds.
Related Finance Terms
- Exchange-Traded Funds (ETFs)
- MSCI (Morgan Stanley Capital International) index
- Passive investment strategy
- Global portfolio diversification
- Market capitalization
