MSCI World for Beginners: What It Is and How It Works

Learn what MSCI World is, which companies are included, how it differs from an ETF, and why many long-term investors use it as the foundation of their portfolio.
8 min read ETF

If you start learning about ETF investing, you will quickly come across the name MSCI World.

This index is frequently mentioned in investing books, articles about wealth building, and discussions about long-term investing. Many investors begin their ETF journey through MSCI World.

But what exactly is it?

Is MSCI World a fund? Which companies are included in it? And why has this index become so popular among investors around the world?

In this article, we’ll explain it in simple terms.

Table of Contents

What Is MSCI World?

MSCI World is a stock market index.

Put simply, an index is a list of companies used to track a specific segment of the market.

In the case of MSCI World, it includes large and mid-sized companies from developed countries around the world.

The index itself cannot be purchased directly. However, there are ETF funds that replicate its structure and allow investors to invest in the companies included in the index.

That is why many people say they “invest in MSCI World,” although in practice they are buying an ETF that tracks the index.

Which Companies Are Included in MSCI World?

Today, the index includes more than a thousand companies from developed countries around the world.

Some of the best-known companies in the index include:

  • Apple;
  • Microsoft;
  • NVIDIA;
  • Amazon;
  • Alphabet (Google);
  • Meta;
  • Nestlé;
  • Novo Nordisk;
  • SAP;
  • Roche.

The composition of the index is reviewed and updated regularly.

It is important to understand that MSCI World is not limited to one country or one industry. The index includes companies from various sectors of the economy, including technology, healthcare, finance, industrials, and many others.

This is one of the reasons why it is considered a well-diversified investment tool.

The main reason for MSCI World’s popularity is simplicity.

Instead of selecting dozens or hundreds of individual companies, investors can gain exposure to a large number of well-known international companies through a single ETF.

For many people, this is a convenient way to invest in the global economy without constantly analyzing individual stocks.

In addition, MSCI World is often considered a foundation for a long-term investment portfolio thanks to its broad diversification and ease of use.

Is MSCI World an ETF?

No.

This is one of the most common misconceptions among beginner investors.

MSCI World is an index.

An ETF is an investment product that can track that index.

For example, different fund providers offer ETFs that follow MSCI World and aim to replicate its performance.

Therefore, when an investor buys an MSCI World ETF, they are not buying the index itself but a fund that tracks the index.

You can learn more about this in our article: “What Is an ETF?”

Advantages of MSCI World

One of the reasons why MSCI World is so popular is its combination of simplicity and diversification.

Some of its main advantages include:

  • Exposure to a large number of companies through a single investment;
  • Diversification across countries and industries;
  • A simple approach for beginner investors;
  • The ability to invest through a Sparplan;
  • No need to select individual stocks.

For many people, MSCI World becomes their first step into the world of investing.

Disadvantages of MSCI World

Despite its popularity, it is important to understand that MSCI World is not the perfect solution for every investor.

For example, MSCI World includes only developed countries.

Emerging markets such as India, Brazil, and China are not included in the index.

In addition, a significant portion of the index consists of U.S. companies. As a result, the performance of MSCI World is heavily influenced by the U.S. economy and the American stock market.

It is also important to remember that ETFs tracking MSCI World can both rise and fall in value. Investing always involves risk.

Who Might MSCI World Be Suitable For?

MSCI World is often considered by people who:

  • want to invest for the long term;
  • prefer a simple investing approach;
  • do not want to select individual stocks themselves;
  • want to invest through an ETF Sparplan;
  • value broad diversification.

This does not mean MSCI World is suitable for every investor. However, for many beginners, it serves as a strong starting point for learning about the stock market.

Key Takeaways

MSCI World is one of the best-known stock market indexes in the world.

It includes more than a thousand large and mid-sized companies from developed countries and is commonly used as the foundation for long-term ETF investing.

For many investors, MSCI World provides a simple way to gain exposure to a large number of international companies through a single ETF.

At the same time, it is important to remember that MSCI World is an index, while investors typically purchase ETFs that track the index.

FAQ

What is MSCI World in simple terms?

It is a stock market index that includes more than a thousand large and mid-sized companies from developed countries around the world.

Can I buy MSCI World directly?

No. Investors usually buy ETF funds that track the MSCI World Index.

How many companies are included in MSCI World?

The number changes over time, but the index typically includes more than one thousand companies.

Is Germany included in MSCI World?

Yes. Companies from Germany and other developed countries are represented in the index.

What is the difference between MSCI World and FTSE All-World?

MSCI World includes only developed markets, while FTSE All-World also includes many emerging markets.

What to Learn Next

Want to Continue Learning About Investing in Germany?

In the Finditerra Telegram channel, we regularly publish simple explanations of investing concepts, ETF guides, educational materials for beginner investors, and practical ideas for long-term wealth building. Whether you’re just starting your investing journey or already building your portfolio, you’ll find useful resources to help you better understand investing in Germany.
  • ETF guides and investing basics
  • MSCI World and global index explanations
  • Broker reviews and comparisons
  • Resources for beginner investors
  • Long-term investing ideas and strategies
  • Insights into investing and personal finance in Germany
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