The MSCI World is a global equity index that represents the performance of large- and mid-cap stocks across 23 developed countries. With over 1,500 constituents, it covers approximately 85% of the free float-adjusted market capitalisation in each country, making it a comprehensive benchmark for the stock performance in developed markets worldwide. Unlike the MSCI All Country World Index (ACWI), which includes both developed and emerging markets, the MSCI World focuses solely on developed economies, providing a focused view of the equity performance in these markets.
The importance of the MSCI World index lies in its utility as a tool for investors seeking exposure to developed markets globally. It serves as a benchmark for comparing the performance of international equity portfolios and is widely used by fund managers to guide the construction of global equity funds. The index is also the basis for many index-linked investment products, such as mutual funds and exchange-traded funds (ETFs), enabling investors to gain diversified exposure to developed markets through a single investment. By tracking the MSCI World index, investors can participate in the growth potential of major industries and companies in developed countries, benefiting from the stability and innovation these economies offer.
Investing in products that replicate the MSCI World Index allows for significant diversification across geographic regions and sectors, reducing the risk associated with concentrating investments in a single country or industry. However, it's important to note that while the index offers broad exposure to developed markets, it does not include emerging markets, which may offer higher growth potential. Investors looking for comprehensive global exposure may consider complementing their investment in the MSCI World with investments in emerging markets.
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