MSCI World

The MSCI World represents 1,400 companies from 23 developed countries. The benchmark of choice for boglehead portfolios. Track your performance against it in Index Balance.

Definition

The MSCI World is the most widely used benchmark index by passive investors. Created by MSCI Inc., it represents large and mid-cap companies from 23 developed countries and includes approximately 1,400 securities. It covers around 85% of the free float-adjusted market capitalisation of developed markets, but deliberately excludes emerging markets.

The MSCI World composition is heavily weighted towards the United States (approximately 68-70% of the index), followed by Japan (~6%), the United Kingdom (~4%), and France (~3%). This geographic concentration is a common debate among investors: some prefer the MSCI ACWI (which includes emerging markets) or complement their holdings with a separate emerging markets fund.

The historical return of the MSCI World since 1970 has been approximately 10-11% annually in USD, although in EUR it can vary significantly with exchange rates. Funds replicating this index, such as the iShares Dev World Index or Vanguard Global Stock Index, are the most popular among European boglehead investors.

Practical example

If you had invested €10,000 in a fund tracking the MSCI World in January 2004 and done nothing else, by January 2024 you would have had approximately €55,000 (annualised return of ~8.8% in EUR, including reinvested dividends). This is a simplified calculation that does not account for fees or taxes.