Investing in MSCI World ETFs
ETFs are often a popular investment product among passive investors. ETFs make it possible to invest in multiple shares with one purchase. An ETF can focus on specific sectors or countries. Would you like to invest in the entire world with one purchase? Then you could opt for so-called world ETFs. The MSCI World index is one of the most popular indices. In this blog we will discuss the following world ETF: the MSCI World ETF .
In this blog, a comprehensive guide to the MSCI World ETF, covering everything you need to know. What is an MSCI World ETF? How does it work? And what are the advantages and disadvantages and how do you invest in it? You will find the answers to these and more questions in this blog!
What is a global ETF?
For some investors, world ETFs are an all-in-one solution. Do you not want to spend a lot of time investing and do you have a long-term strategy? Then a world ETF can be an interesting and simple investment. You do not track 1 national index like with an AEX ETF, but you track a selection of shares from different national indexes. In this way, you can cover a large part of the world with one product. Please note that a world ETF, despite the diversification, does not mean that you invest without risk. Investing always involves risk, so never invest with money that you cannot afford to lose. A well-known example of a world index is the MSCI World index. However, there are also other world indices, such as:- FTSE All-world Index
- MSCI ACWI
- MSCI AND IMI
What is the MSCI World ETF?
The MSCI World ETF is a global exchange-traded fund that tracks the MSCI World Index. But what exactly is the MSCI World index? The MSCI World Index is a market capitalization-weighted index that represents the performance of large and mid-sized stocks in 23 developed countries. The MSCI World Index includes approximately 1,600 stocks from companies in various sectors, such as financials, technology, healthcare and consumer goods. The largest number of stocks (over 68%) come from the United States. Followed by Japan and the United Kingdom. In terms of sectors, the ETF is more evenly distributed, with technology being the most represented sector at around 20%. The MSCI World Index is tracked by several ETFs. There are currently 14 MSCI World ETFs.Best MSCI World ETFs
If you are interested in investing and want to track the global market, an MSCI World ETF may be a good option for you. Choosing the best MSCI World ETF can be a challenge, as there are several options available. For example, there are 14 different ETFs that track the MSCI World index. To make a good choice, it is important to look at various factors such as costs, portfolio diversification and past performance. In the table below you can see the top 5 MSCI World ETFs that are traded the most on the stock exchange (in random order).
| # | ETF name | ISIN |
|---|
| 1 | iShares Core MSCI World UCITS ETF USD (Acc) | IE00B4L5Y983 |
| 2 | Lyxor Core MSCI World (DR) UCITS ETF – Acc | LU1781541179 |
| 3 | iShares Core MSCI EM IMI UCITS ETF USD Acc | IE00BKM4GZ66 |
| 4 | HSBC MSCI WORLD UCITS ETF | IE00B4X9L533 |
| 5 | iShares MSCI World SRI UCITS ETF EUR (Acc) | IE00BYX2JD69 |
How does the MSCI World ETF work?
The MSCI World ETF is designed to replicate the performance of the MSCI World Index. It does this by investing in a portfolio of stocks that are included in the same proportions as the index. As a result, the MSCI World ETF offers investors exposure to a diverse range of stocks in developed countries.
Benefits of investing in a global ETF
The advantages of the MSCI World ETF are mainly in its simplicity. With 1 transaction you invest in multiple shares spread across the world. It has advantages such as: diversification, low costs, high liquidity and international.
Diversification
One of the key benefits of investing in the MSCI World ETF is diversification. The MSCI World ETF provides exposure to stocks in developed countries, which helps to reduce the risk of investing in a single country or sector.
location costs
Another advantage of investing in the MSCI World ETF is its low costs. The expense ratio of the MSCI World ETF is typically lower than actively managed funds, making it an attractive option for cost-conscious investors.
Liquidity
The MSCI World ETF is traded on stock exchanges, making it easy for investors to buy and sell shares. The high liquidity of the MSCI World ETF ensures that investors can enter or exit their investment at any time.
Access to international markets
Investing in the MSCI World ETF offers investors exposure to international markets that may not be available in their home country. This exposure can provide investors with a unique opportunity to diversify their portfolio and potentially benefit from international economic growth.
Disadvantages of investing in a global ETF
The MSCI World ETFs do not only have advantages. Apart from the general risk that investing has, there are also some disadvantages to the MSCI World ETF.
Stable but volatile
While the MSCI World ETF offers diversification across developed countries, a large percentage is from the United States. As a result, investors may be exposed to concentration risk. Trends that occur in America will therefore have a greater impact on the ETF.
In addition, the index consists only of shares, which makes the investment more volatile than if you have a mixed fund with, for example, bonds.
Currency risk
Investing in the MSCI World ETF also means that investors are exposed to currency risk. Since the MSCI World Index includes companies domiciled in different countries, the ETF may be exposed to different currencies.
Dividend leakage
The ETFs can be subject to dividend leakage. Dividend leakage has to do with foreign taxes that you cannot reclaim. Read all about dividend leakage in ETFs in our blog about dividend leakage.
How to invest in the MSCI World ETF?
Investing in the MSCI World ETF is easy and can be done through an online broker. Investors can buy and sell shares on stock exchanges such as the NYSE, NASDAQ or Euronext. It is important to check the expense ratio of the ETF before purchasing the ETF.
Strategies for investing in the MSCI World ETF
A popular strategy for investing in the MSCI World ETF is the buy-and-hold strategy . This involves investors buying shares in the ETF and holding them for a long period of time, profiting from stock market growth over time.
Another strategy for investing in the MSCI World ETF is dollar-cost averaging . This involves investors buying shares at regular intervals, regardless of the price of the shares. This strategy can help reduce the risk of timing the market.
Conclusion: Buy MSCI World ETFs
The MSCI World ETF offers investors a low-cost, diversified and liquid investment opportunity that provides exposure to developed country equities across multiple sectors. While there are drawbacks, such as concentration risk and currency risk, investors can still enjoy the benefits of the ETF. It is important to check the expense ratio of the ETF and choose a strategy that suits your personal investment goals and risk appetite.