Indexes such as the S&P 500 and MSCI track the performance of a specific group of stocks or financial assets. They essentially serve as benchmarks to gauge the market’s overall performance or specific market sectors.
Investing in these types of indexes through ETFs and index funds replicating the respective index’s performance is possible. Through these investment vehicles, the investor achieves diversification across a broad set of companies or assets represented by the index.
In this article, we’ll dive into the differences between the S&P 500 and the MSCI World so that you can make a better-informed decision when choosing which index to invest in. We will cover performance, country exposure, sector exposure, availability of ETFs, and more!
MSCI World vs S&P 500 compared in a nutshell
Our team has compiled all the information discussed throughout the article into a table, so that it can be easier for you to observe the differences and make a decision.
|Index||MSCI World||S&P 500|
|Number of holdings||1518||505|
|Top 5 Countries||US, Japan, UK, France and Canada||US only|
|Top 5 Sectors||Information Technology, Health care, Financials, Consumer Discretionary and Industrials||Information Technology, Health care, Consumer Discretionary, Financials, Communication Services|
|Availability of ETFs||Limited||Broader|
Overview of the S&P 500 and the MSCI World
The Standard & Poor’s 500, known as the S&P 500, is one of the primary indices in the United States. It comprises 500 large-cap companies listed on the U.S. stock exchange, representing various sectors of the economy. Therefore, it is used to indicate the performance of the U.S. stock market as a whole.
Morgan Stanley Capital International, known as MSCI, is a financial services company that provides a wide range of global market indices. This index tracks the performance of large and mid-cap company stocks in 23 developed markets worldwide.
The MSCI World Index includes large and mid-cap stocks from 23 developed countries, resulting in stocks from various countries being listed on different exchanges.
On the contrary, the S&P 500 exclusively focuses on large-cap US equities listed on US exchanges.
Given that, do you think a US-based company listed in the NASDAQ or NYSE has 100% US-country risk?
Around 40% of the revenues of the S&P 500 companies came from countries outside of the USA, which means that assessing the company’s country revenues (and, consequently, currency exposure) will help you better understand the actual country risks of the business, more about it in our article about understanding your country/currency exposure.
Both indices focus on the same sectors of activity, with Information Technology standing out prominently in both cases. Generally speaking, all other categories have a similar percentage incidence in both indices.
|Sector (weights)||MSCI World||S&P 500|
Number of Holdings
While the MSCI World Index boasts a diverse range of 1,518 constituents, the S&P 500 falls short with only 505 holdings. It may seem odd that the S&P 500 has 505 stocks instead of 500. However, our team has brought you the reason behind this discrepancy. This is because there are 5 companies in the S&P 500 that have multiple classes of shares, accounting for the additional 5 stocks.
Top 10 Holdings
Our team has gathered the top 10 holdings of each index, so the table confirms that they are pretty similar. However, each stock’s weights in the respective index differ. For example, while Apple has a weight of 5.20% in the MSCI World, it reaches 7.05% in the S&P 500.
|S&P 500||MSCI World|
|Apple Inc||7.05%||Apple Inc||5.20%|
|Microsoft Corp||6.68%||Microsoft Corp||4.05%|
|Amazon.com Inc||3.40%||Amazon.com Inc||2.23%|
|Nvidia Corp||2.97%||Nvidia Corp||2.13%|
|Alphabet Inc Cl A||2.16%||Alphabet Inc Cl A||1.42%|
|Tesla Inc||1.96%||Alphabet Inc Cl C||1.29%|
|Alphabet Inc Cl C||1.87%||Tesla Inc||1.29%|
|Meta Platforms Inc Class A||1.81%||Meta Platforms Inc Class A||1.15%|
|Berkshire Hathaway Inc Cl B||1.73%||Berkshire Hathaway Inc Cl B||0.82%|
|Eli Lilly Cor||1.25%||Exxon Mobil Corp||0.79%|
A pattern observed in the top 10 holdings is that the companies tend to be from the United States, so although the MSCI World is more geographically diversified, it still carries a significant relative weight (approximately 69%).
Availability of ETFs
As you may already know, you cannot directly purchase an index. You need to buy a fund that tracks that index. Two types of funds that can track an index include exchange-traded funds (ETFs) and index funds.
The S&P 500 is such a renowned index that it is traded worldwide, leading to an almost endless supply of ETFs replicating it. Therefore, our team has gathered a selection to showcase in this article.
|Name||ISIN||Ticker*||Annual fee (TER)||Replication method||Use of income|
|iShares Core S&P 500 UCITS ETF||IE00B5BMR087||CSSPX||0.07%||Physical||Accumulating|
|Vanguard S&P 500 UCITS ETF||IE00B3XXRP09||VUSA||0.07%||Physical||Distributing|
|Invesco S&P 500 UCITS ETF||IE00B3YCGJ38||SPXS||0.09%||Synthetic||Accumulating|
|Xtrackers S&P 500 Swap UCITS ETF||LU0490618542||XSPX||0.15%||Synthetic||Accumulating|
|SPDR® S&P® 500 UCITS ETF||IE00B6YX5C33||SPY5||0.09%||Physical||Distribution|
The availability of ETFs tracking the MSCI World Index is limited, with fewer exchanges offering such options. Investing in the MSCI World Index presents a restricted range of choices, primarily centred around ETFs listed on the Euronext Amsterdam, XETRA and Borsa Italiana.
|Name||ISIN||Ticker*||Annual fee (TER)||Replication method||Use of income|
|iShares Core MSCI World UCITS ETF USD||IE00B4L5Y983||SWDA||0.20%||Physical||Accumulating|
|iShares MSCI World UCITS ETF (Dist)||IE00B0M62Q58||IWRD||0.50%||Physical||Distributing|
|Invesco MSCI World UCITS ETF||IE00B60SX394||SMSWLD||0.19%||Synthetic||Accumulating|
|HSBC MSCI World UCITS ETF USD||IE00B4X9L533||HMWD||0.15%||Physical||Distributing|
|HSBC MSCI World UCITS ETF USD (Acc)||IE000UQND7H4||HMWA||0.15%||Physical||Accumulating|
The chosen ETFs to measure the performance of each index are the iShares Core S&P 500 UCITS ETF (CSPX) and the iShares Core MSCI World UCITS ETF USD (SWDA).
Our team has collected the historical performances of these two ETFs since 2012 to showcase the performance of each index. When comparing the performance of both indices, it is evident that the S&P 500 outperforms the MSCI World Index.
In green, it is possible to observe the evolution of the iShares Core S&P 500 UCITS ETF (CSPX), while in blue, it is possible to observe the trend of the iShares Core MSCI World UCITS ETF USD (SWDA).
Nevertheless, it is crucial to recognize that past performance is not indicative of future returns, and these results may not persist indefinitely.
Cheapest Brokers to Invest in ETFs
Now that you’re familiar with the differences between the two ETFs and have decided, it’s time to choose the best broker to move forward with your investment. That’s why Investing in the Web collected all this information, evaluated the most important features of different European ETF brokers, and compiled a list of the 4 ETF brokers in Europe.
Without further delay, here are four ETF brokers in Europe and why you should consider them:
- eToro: Best for social trading and commission-free investing
- Interactive Brokers: Best for the largest ETF offering
- DEGIRO: Best for low-cost ETF trading
- Trading 212: Best for commission-free stock and ETF trading
Disclaimer: eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk. Other fees apply. For more information, visit etoro.com/trading/fees.
|Broker||ETF fees||Minimum Deposit||Number of ETFs||Regulators|
|eToro||$0 (not all ETFs)||$50 (varies between countries)||260+||FCA, CySEC, ASIC|
|Interactive Brokers||Varies by exchange with tiered Pricing:0.05% of Trade Value (min: €1.25, max: €29.00)||€/$/£0||13,000+||FINRA, SIPC, SEC, CFTC, IIROC, FCA, CBI, AFSL, SFC, SEBI, MAS, MNB|
|DEGIRO||€/£0 (in some ETFs, + a €/£1 handling fee), plus an annual €/£2.50 connectivity fee||€/£1||200+||DNB and AFM|
|Trading 212||€/£0||€/£0||600+||FCA and FSC|
By investing in the MSCI World index, you can benefit from broader global diversification across various geographies (and sectors). As such, this index gives you direct exposure to international markets beyond the US, contrary to the S&P 500. With a larger number of companies in its index, it offers you the opportunity to diversify your investments further.
Additionally, you can choose from multiple exchange-traded funds (ETFs) that track the performance of the S&P 500 and MSCI World indices.
In summary, if you’re looking to expand your investment horizons, the MSCI World index provides a more comprehensive global perspective compared to the US-focused S&P 500, offering you the potential for enhanced diversification in your portfolio.