MSCI World vs S&P 500: which should you choose?

MSCI World vs S&P 500

MSCI World

The MSCI World index includes around 1,500 large and mid-sized companies across 23 developed countries. These countries include the United States, the United Kingdom, Germany, France, Japan, and Australia. By spanning so many regions, the index offers you exposure to a wide range of economies and industries.

When you invest in an index fund that tracks the MSCI World, you’re effectively buying a small slice of the biggest companies in the developed world, household names like Apple, Nestlé, Toyota, and Unilever. This gives you instant diversification without having to pick individual stocks yourself.

The MSCI World is often used as the backbone of global portfolios because it’s simple, well-diversified, and historically has delivered strong long-term returns. Since its creation in 1979, it has grown by an average of around 10% per year. Of course, the returns fluctuate over shorter periods, but it’s a good example of how investing broadly in global markets can grow your wealth over time.

S&P 500

The S&P 500 is made up of roughly 500 of the largest publicly listed companies in the United States. It’s one of the most well-known and widely followed indices in the world. Because the U.S. stock market represents a large share of global economic activity, the S&P 500 is often seen as a benchmark for global stock market performance.

Companies like Apple, Microsoft, Amazon, and Coca-Cola are all part of the S&P 500. When you invest in a fund that tracks it, you’re buying a piece of some of the most profitable and innovative businesses in the world. The index automatically adjusts its composition as companies grow, shrink, or drop out, so it always reflects the largest and most influential firms in the American economy.

Even though it focuses only on the U.S., the S&P 500 gives you exposure to many global businesses that operate around the world. Historically, it has also provided strong long-term growth, averaging around 10% per year over several decades. For many investors, it’s the first step into index investing because of its simplicity, familiarity, and proven track record.

Why choose MSCI World?

Broader global diversification

When you invest in the MSCI World index, you’re spreading your money across over 1,500 companies in 23 developed countries. This means you’re not betting everything on one economy, such as the United States. Instead, you’re investing in the growth of the developed world as a whole.

This wider diversification helps protect your portfolio from country-specific risks. For example, if the U.S. market experiences a downturn, strong performance in Europe or Japan could soften the blow. It’s a simple way to make your investments more resilient to shocks in any single region.

Exposure to multiple currencies and economies

Because the MSCI World includes companies from Europe, Japan, Canada, Australia, and more, your exposure goes beyond just the U.S. dollar. This is useful if you want to balance your portfolio across different currencies and regional economic cycles.

The U.S. has performed exceptionally well in recent decades, but there’s no guarantee that this will always be the case. Other regions could take the lead in the future, and investing in MSCI World ensures you’re positioned to benefit if that happens.

A simple global “one-stop shop”

The MSCI World appeals to investors who want a straightforward, globally diversified portfolio without the need to fine-tune allocations between different regions. If you believe that no single country will dominate forever, this index is a convenient way to invest in the world’s major economies in one go.

The downsides

Even though MSCI World sounds globally balanced, it’s still heavily tilted towards the U.S. with roughly 70% of the index’s weight is made up of American companies like Apple, Microsoft, and Amazon. So while it’s more diversified than the S&P 500, it’s not a perfect hedge against U.S. market performance.

Another limitation is that it excludes emerging markets such as China, India, and Brazil. These regions can offer higher growth potential, though they also come with more volatility.

Finally, the MSCI World has historically lagged slightly behind the U.S.-only S&P 500 in recent decades, mainly because of the strong performance of U.S. tech giants. But that trend could shift in the future, diversification means you’re prepared either way.

Why choose S&P 500?

Strong historical performance

The S&P 500 represents roughly 500 of the largest and most established companies in the United States, names like Apple, Microsoft, Amazon, and Coca-Cola. Over the past several decades, it has been one of the best-performing indices in the world.

When you look at historical data, the S&P 500 has consistently outperformed broader global indices such as the MSCI World over 5, 10, 15, and even 20-year periods. Much of this success comes from the dominance of U.S. technology and consumer companies, which have driven enormous growth since the early 2000s.

While past performance doesn’t guarantee future results, it does show how powerful long-term investing in the U.S. stock market has been.

Simple and familiar

Many investors like the S&P 500 because it’s straightforward. You invest in one index that covers the biggest and most influential U.S. companies. The market is transparent, heavily regulated, and highly liquid, meaning you can buy and sell easily without hidden surprises.

It’s also psychologically easier for many people. You probably already know most of the companies in the S&P 500 and use their products daily, from your iPhone to your Netflix subscription. That familiarity makes it a comfortable starting point for many first-time investors.

Stability for U.S.-based investors

For investors whose base currency is the U.S. dollar, sticking to the S&P 500 helps avoid exchange-rate swings. Currency fluctuations can significantly affect returns when investing abroad, so for U.S. investors, keeping everything in dollars simplifies things.

This advantage doesn’t apply to Europeans whose home currency is the euro, but it’s useful context for understanding why the S&P 500 is so popular globally.

The downsides

The main drawback of investing only in the S&P 500 is concentration risk. You’re fully exposed to one country: its economy, politics, and financial system. If the U.S. enters a long period of slower growth, your portfolio will feel it directly.

By focusing solely on U.S. companies, you also miss out on opportunities in other parts of the world, like Europe or emerging markets in Asia and South America. Those regions might outperform the U.S. in the coming decades, and you wouldn’t benefit if all your investments are tied to the S&P 500.

Finally, for euro-based investors, there’s the additional currency risk. If the U.S. dollar weakens against the euro, your returns will be lower once converted back to euros, even if the S&P 500 itself performs well.

Performance: what the numbers tell us

Over the long term, the S&P 500 has slightly outperformed the MSCI World, mainly thanks to the strong run of U.S. companies over the past few decades. However, both indices have moved in similar patterns, showing nearly the same level of volatility. While the S&P 500 has delivered higher returns, the MSCI World offers broader diversification across developed countries, so your choice depends on whether you prefer higher U.S. exposure or wider global coverage.

What should you consider?

At Curvo, when we help Europeans start investing, we always look beyond just which index to choose. The right choice depends on your personal situation, your goals, and a few practical details that are often overlooked.

Tax efficiency

Taxes can have a big impact on your returns, especially in Belgium where Curvo launched. One key detail is whether an ETF is accumulating or distributing.

• Accumulating funds automatically reinvest dividends back into the fund. This is often more tax-efficient for Belgians, because you avoid the 30% tax on dividends.
• Distributing funds, on the other hand, pay dividends out to you in cash, which are taxed when received.

When you’re comparing ETFs that track the same index, make sure to check the distribution type before investing.

Currency exposure

Most global indices, including the S&P 500 and MSCI World, are heavily weighted towards U.S. companies. This means a large part of your investments will be in dollars. For a euro-based investor, that creates currency exposure: when the euro strengthens against the dollar, the value of your investment in euros will fall, and vice versa.

There’s nothing wrong with this, global diversification naturally brings some currency risk, but it’s important to be aware of it.

Transaction tax and fund domicile

The country where an ETF is domiciled matters more than most people think. In Europe, Irish-domiciled ETFs are usually the most tax-efficient for Europeans. That’s because Ireland has favourable tax treaties with the United States, which reduces withholding taxes on dividends from U.S. companies.

In contrast, ETFs domiciled elsewhere might be less efficient. Also keep in mind the Belgian transaction tax, which can range from 0.12% to 1.32% depending on the fund’s characteristics. It’s worth checking this before you invest.

Ease of monthly investing

We believe that successful investing isn’t about timing the market, but about building a habit. Regular, automatic investing, like setting up a monthly plan, helps you grow your wealth steadily over time.

So whichever index you choose, make sure your setup supports this approach. With some brokers, monthly investing can be tedious or costly.

Portfolio fit

Finally, think about how your choice fits into your overall portfolio. The question isn’t just “MSCI World or S&P 500?”, but rather “How does this index fit with the other assets I already hold?”.

If you already have exposure to global or emerging market funds, adding the S&P 500 might overweight you towards the U.S. On the other hand, if you only hold European investments, adding MSCI World could give you much-needed global diversification.

Choosing between the MSCI World and the S&P 500 can feel tricky, especially since both are strong options. The good news is that there’s no wrong choice, both indices give you exposure to some of the best companies in the world. The right answer depends on what you value most in your investments.

Here’s a simplified way to think about it:

• You want global diversification across many developed countries → lean towards MSCI World.
• You believe in the strength of the U.S. economy, prefer large, familiar companies, and accept some concentration risk → S&P 500 could make more sense.
• You’ll only pick one ETF and want to keep things simple → either index works, as long as you understand the trade-offs.
• You already own global or emerging market funds, and you want to increase your U.S. exposure → consider adding S&P 500 as a smaller slice of your portfolio.
• You’re worried about future U.S. underperformance or want to hedge against a country-specific downturn → go for MSCI World, or even a broader “all-world” index that includes emerging markets.

The key takeaway

The best index is the one you’ll stick with, through the good times and the bad. Markets will rise and fall, but what matters most is staying consistent with your plan.

At Curvo, we believe index investing works best when you stop worrying about picking the perfect index and instead focus on building a reliable, long-term system.

Here are a few ways to approach it:

• Combine both indices. Use MSCI World as your global core, and add S&P 500 for a U.S. tilt if you want extra exposure to American companies.
• Go beyond both. If you want the widest coverage, look at a global “all-world” index that includes emerging markets. For instance, the portfolios in the Curvo app invest in global funds that hold over 7,500 companies across nearly 40 countries.
• Keep it simple. Choose one index, invest every month, and don’t try to time the market. Consistency beats complexity every time.

Final thoughts

There’s no single “correct” answer to the MSCI World vs S&P 500 question. The right choice depends on what you believe in, how much risk you’re comfortable with, your tax situation, and how hands-on you want to be with your portfolio.

At Curvo, we believe long-term success doesn’t come from trying to predict which region will perform best next year. It comes from keeping things simple: staying diversified, keeping costs low, and investing regularly.

Whether you go for the MSCI World, the S&P 500, or a mix of both, the key is to build a plan you can stick with for years. That consistency will do more for your wealth than any attempt to time the market ever could.