The MSCI World Index is one of the most popular indexes to invest in, and ETFs are the most accessible instrument for Belgians. But there are many MSCI World Index ETFs that Belgians can choose from. Which one should you buy?
We will also look at the MSCI World index in more detail, show you what you should pay attention to when choosing an MSCI World Index ETF, and discuss some of our favourites. This should offer you a framework to find the ETF that is most suitable for you as a Belgian investor.
Why an MSCI World ETF is a great investment for Belgians
MSCI World is an index composed of about 1,500 stocks from 23 countries that economists qualify as "developed": United States, Germany, Japan… It was developed by Morgan Stanley Capital International (MSCI), the MSCI World index is designed to represent the performance of large- and mid-sized companies.
The index has a very broad diversification across North-America, Europe, parts of Asia-Pacific. Companies are selected based on their "market capitalization", so the bigger the company the more important their weight within the index. For example, at the time of writing, Apple and Microsoft together hold a weight of nearly 10% in MSCI World.
Due to their importance in the global economy, the USA holds around 70% of the market cap of the index, with other major contributors like Japan, UK, France, Canada. As it focuses entirely on developed countries, emerging countries like India and China are excluded from the index.
The returns of MSCI World have also been excellent throughout the years. Since 1979, the MSCI World index has delivered an average return of 10.13%! If you had invested €10,000 in 1979, you would have had around €900,000 today.
How to choose the best MSCI World ETF as a Belgian investor
With over 145 ETFs tracking the MSCI World index or a variant thereof, how do we know which is the best one to choose? It can be quite overwhelming to do the research.
To help us make a choice, we will compare the MSCI World ETFs below based on:
- Distribution of dividends. From a taxation point of view, accumulating funds are preferred over distributing funds to avoid paying a 30% tax on dividends.
- Domicile. Luxembourg and Ireland have special tax treaties with the US that make it attractive to set up funds there. As a Belgian investor, you can benefit from this by investing in funds that are domiciled in one of these two countries.
- Currency. If you buy a fund that is not traded in Euro (€), the broker will likely convert it for you. But this comes at an additional cost.
- Size. Larger funds are less likely to be shut down.
- Replication. Physical replication is preferred over synthetic replication to reduce third-party risk.
- Cost. Fund managers charge a fee for managing their funds. The total cost of a fund is indicated by the total expense ratio (TER). Naturally, the lower the better!
- Sustainability. Some ETFs follow a sustainable version of the MSCI World index where some companies have been excluded based on ethical views.
If you wish to dig deeper on the topic, we also published a resource that look at the tips you need to be aware of as a Belgian investor when buying ETFs.
The best MSCI World ETFs for Belgians
Based on the criteria above, we selected the following five MSCI World ETFs that could be of interest to you. Note that we chose the following criteria for all of them:
- Only accumulating funds to avoid 30% tax on dividends
- Registered out of Belgium for tax efficiency
- Only EUR funds to avoid currency risk
Performance of MSCI World ETFs
We analysed the performance of the five chosen ETFs since 2017:
What immediately stands out is that the performance of these ETFs doesn't vary too much as they all track the same index. The only exception is the iShares MSCI World SRI ETF, which tracks a sustainable version of the MSCI World index, namely MSCI World SRI Select Reduced Fossil Fuels. This index excludes companies with exposure to fossil fuels through extraction and production activities, power generation activities or reserves ownership.
If all ETFs tracking the MSCI World index are more or less the same, what to look out for when choosing one?
- Largest ETF: Liquidity is a key component of ETF investing, which allows you to make transactions easier at a fairer price. IWDA (IE00B4L5Y983) is by far the most liquid ETF, nearly seven times larger than the second biggest fund! This is why many investors choose IWDA to invest globally.
- Sustainability: If sustainability is important to you, then 2B7K (IE00BYX2JD69) is a solid option. Do note that since it excludes certain companies, it provides less diversification than the non-sustainable MSCI World ETFs.
- Cheapest: ETFs which have a low expense ratio will benefit long term as the maximum amount of capital remains invested for the long term (instead of paying management fees). When it comes to costs, SWRD (IE00BFY0GT14 ) and LCUW (LU1781541179) offer the lowest rates at 0.12% per year.
Say you're convinced to invest in an MSCI World ETF. How to buy it?
How to buy an MSCI World ETF
There are three steps:
- Choose the MSCI World ETF that fits you best using our comparison above.
- Open an account with a broker. Our comparison of brokers can help you choose.
- Place an order!
Follow our step-by-step guide to investing in the MSCI World index through IWDA.
Curvo, an easy option to put your savings to work
At Curvo, we strongly believe that index investing is the best way for most Belgians to grow their wealth and prepare for their financial future. And we built Curvo to make index investing accessible to all Belgians.
The Growth portfolio is a great alternative to the MSCI World index. The portfolio, along with the other portfolios, is managed by NNEK, a Dutch investment firm licensed by the Dutch regulator (AFM).
It's composed of two funds, both offered by Vanguard:
- FTSE Developed All Cap Choice index (ISIN: IE00B5456744)
- FTSE Emerging All Cap Choice index (ISIN: IE00BKV0W243)
Together, these funds cover the entire world and are a good approximation to an investment in the world economy like the MSCI World index offers.
Sustainable investing is challenging because everyone has different beliefs and values. The funds chosen in Growth focus on one guiding principle: they don't invest in companies that are considered destructive to the planet. This means the following sectors are excluded:
- non-renewable energy (nuclear power, fossil fuels)
- vice products (adult entertainment, alcohol, gambling, tobacco)
- weapons (civilian firearms, military weapons)
- controversial companies that do not meet the labour, human rights, environmental and anti-corruption standards defined by the United Nations Global Compact
No transaction tax
Each of the MSCI World ETFs we discussed is liable for the Belgian transaction tax. You need to pay this tax every time you buy or sell an ETF. But one advantage of Curvo is that the Belgian transaction tax is not applicable. This means you’re saving between 0.12% and 1.32% per transaction.
All your money is invested
Your investments work with fractional shares meaning that all your money is invested. When buying your own ETFs, you're required to buy whole units of shares. This can make it much harder to do invest monthly (which we recommend!) because you may have to wait several months until you've saved enough to buy a single share. You'll also always be left with some cash on your brokerage account.
You don't encounter these issues with the Growth portfolio. You can start investing from the first month, from €50, and every cent will be invested for you. You can also set up a saving plan to send contributions monthly and put your investments on autopilot.
Portfolio tailored to you
Next to Growth, you can invest in other portfolios, each suited for a different financial goal and appetite for risk. Each of these portfolios were built and are managed by NNEK. When you sign up to Curvo, you are asked a couple of questions to determine your goal and the risk you are seeking. NNEK then matches you with the portfolio that's best suited to you.
Explore how Curvo works if you want to learn more.
Buying ETFs is usually cheaper
Investing in one of NNEK's portfolios through Curvo is usually more expensive than buying MSCI World ETFs like the ones listed above through a broker. The fee starts from 0.6% “all-in” on your total investments, but provides you with peace of mind as everything is taken care of: taxes, rebalancing, purchases, etc...
The MSCI World index is a great investment for Belgians, offering an easy way to invest in the global economy with its diversified, market-cap-weighted portfolio of major companies. Key considerations for selecting the right MSCI World ETF include tax efficiency, fund domicile, currency risks, fund size, replication methods, costs, and whether they're sustainable or not.
We hope the list is helpful in making a choice on which MSCI World ETF to buy! Whichever ETF you end up choosing, you’ve already made the right choice as ETFs are a great investment that provide diversification at a fairly low cost.
Questions you may have
What's the difference between MSCI World and MSCI ACWI?
Whereas MSCI World includes stocks from only developed markets, the MSCI All Country World index (ACWI) also invests in emerging markets. This makes MSCI ACWI a better choice for investors seeking a truly global exposure.
How does the MSCI World index perform vs other major indices?
We ran the analysis through Backtest and compared it with three other indices:
- MSCI ACWI: similar to MSCI World, but including developing markets into an All Country index.
- S&P 500: entirely focused on the US economy.
- Nasdaq-100: entirely focused on the technology stocks of the American economy.
The MSCI World is one of the most diversified indexes in the world, and as a result offers less fluctuations than indexes that are heavily concentrated in one region or industry (such as the S&P 500 and Nasdaq-100).