What is the MSCI World Index?

The MSCI World Index is an Index consisting of the largest companies around the world. For many (professional) investors it is the indicator of the development of the global economy and as such acts as the benchmark. A benchmark serves as the measuring stick by which investment portfolios are evaluated and compared against one another.

Does this index therefore reflect the state of the global economy?

Indeed, this raises the question. This is because the Index focuses only on developed countries, thus excluding major emerging economies. Countries such as China, India, and Saudi Arabia have large global companies but are not included in this Index. Even though China's economy is second in the world and India ranks fifth.

The Index focuses primarily on the largest economy worldwide: the United States. No less than 70% of the MSCI World Index is made up of U.S. companies. While Japan, as the world's fourth largest economy, participates with only 6%. Unsurprisingly, the U.S. portion is primarily made up of the well-known tech giants Apple, Microsoft, Nvidia, and Alphabet (Google).

An investment in the MSCI World Index is thus more of an investment in Western Tech companies.
The alternative is the lesser-known MSCI All-Country World Index. This index has twice as many participants (about 3,000), is also about twice as large, and also includes emerging economies in its composition. The United States remains leading but it is clear that the MSCI All Country World Index (MSCI ACWI) better reflects the development of the global economy.

How to invest in the MSCI World Index

Investing in the MSCI ACWI can be done through an ETF. This stands for Exchange Traded Fund and is a low-cost mutual fund that tracks the underlying asset. In this case, the underlying asset is the MSCI All-Country World Index. This ETF has several providers and can be purchased through your bank or broker.

Disclaimer: Investing involves risk. Our analysts are not financial advisors. Always consult an advisor when making financial decisions. The information and tips provided on this website are based on our analysts' own insights and experiences. They are therefore for educational purposes only.