MSCI World ETF vs S&P 500 ETF: Which Outperforms Over 20 Years?

MSCI World ETF vs S&P 500 ETF: Which Outperforms Over 20 Years?

For two decades, European investors have debated the choice between an ETF tracking the S&P 500 index and an ETF based on the MSCI World. These two indices are among the most popular for broad exposure to international equities but have distinct performance and risk profiles. This article offers a rigorous comparative analysis of the 20-year performance, in euros, of MSCI World and S&P 500 ETFs, based on precise historical data and key indicators. We also break down the periods 2000-2010 and 2010-2020 to better understand the factors behind their respective variations, before concluding with a verdict tailored to intermediate-profile French investors.

Overview of the Indices and Representative ETFs

The S&P 500 is an index composed of the 500 largest U.S. capitalizations, primarily large-cap U.S. stocks. It is considered a barometer of the American economic health and benefits from a strong concentration in the technology and cyclical consumer sectors.

The MSCI World includes approximately 1,600 stocks from 23 developed countries, with the United States representing on average 65% to 70% of the weighting. This index offers broader geographic diversification, encompassing Europe, Japan, Canada, Australia, and other developed markets.

For comparison, we use two physically replicated ETFs popular in Europe:

• iShares Core S&P 500 UCITS ETF (ISIN: IE00B5BMR087), TER 0.07%
• iShares MSCI World UCITS ETF (ISIN: IE00B4L5Y983), TER 0.20%

Performances are calculated in euros, with net dividends reinvested, excluding brokerage fees.

Annualized Total Performance Over 20 Years (2003-2023)

Over the long 20-year period, the S&P 500 ETF clearly outperformed the MSCI World in euros, with an annualized return of +9.8% versus +7.9% for the MSCI World. This outperformance is mainly explained by the American dominance in economic and technological growth, particularly marked during the 2010-2020 decade.

Decade-by-Decade Analysis: 2000-2010 vs 2010-2020

2000-2010: Difficult Decade, MSCI World More Resilient

The 2000-2010 decade was marked by two major crises: the bursting of the internet bubble in 2000 and the global financial crisis in 2008. During this period, the S&P 500 suffered from high volatility and stagnation in valuation: