The MSCI World Index has suffered disappointing losses this year, prompting private investors to look for alternative investment strategies. The index includes large and mid-sized companies from 23 developed markets and is heavily dominated by the USA, which makes up about 72% of the index.
MSCI World Index: Background and Composition
Composition: The MSCI World Index contains stocks from 23 developed markets, with the USA holding the largest share.
Variants: There are three variants of the index: price index, gross index, and net index. The net index is the most realistic representation for investors, as it takes withholding taxes into account.
Alternatives to the MSCI World Index
- MSCI ACWI IMI Index: This index includes both developed markets and emerging markets as well as small-cap stocks, providing a broader diversification.
- FTSE Developed World Index: Similar to the MSCI World, but with potentially different country weightings.
- FTSE All-World Index: Includes both developed and emerging markets, thus offering a more comprehensive global coverage.
ETFs as an Alternative
Recommended ETFs: For the MSCI World itself, there are ETFs from providers like Amundi, HSBC, SPDR, and Invesco.
Risk Reduction: Alternatives can reduce risk through diversification across various markets and sectors.
Benefits of Alternative Investment Strategies
- Lower Risks: By diversifying across multiple markets and sectors, investors can lower their risks.
- Better Return Opportunities: Alternatives can offer better returns, especially when they include emerging markets or small-cap stocks.
- Flexibility: Investors can adjust their investment strategy to respond to changing market conditions.
Overall, alternative ETFs and index funds offer private investors the opportunity to manage their risk and improve their return potential by focusing on a broader range of markets and asset classes.