How can I invest in the MSCI World?

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How can I invest in the MSCI World?

In addition to the numerous country- or sector-related indices (such as the NASDAQ or the FTSE 100), there are also global stock indices. By far the most important one of these is the MSCI World. What you should know about this index, its importance and why it may be worth it to invest in this index will be explained and discussed in this article.

The MSCI World

Among the global stock indices (e.g. the Dow Jones Global Titans, S&P Global 1200, MSCI Emerging Markets Index), the MSCI World is certainly the most important and most significant one. It contains over 1,600 shares of companies from the most important industrial nations and thus also offers a good comparison to other indices in regard to their performance in a global context. The MSCI Emerging Markets Index is the counterweight by referring only to developing countries. The MSCI All Country World Investable Market Index, on the other hand, reflects all companies in industrialized and developing countries worldwide and contains around 8,500 shares from a total of 45 countries. However, it is still considered to be far less meaningful than the well-known MSCI World.

The index is created by Morgan Stanley (more precisely: Morgan Stanley Capital International). Usually only the share price index is published, but a performance index for the MSCI World is also compiled by Morgan Stanley.

Another interesting aspect of the MSCI World is that monetary policy measures are generally more clearly reflected in the index than the actual economic situation of companies or the global economic situation. This also makes it very interesting for investments.

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Index funds on the MSCI World

One way to invest in the MSCI World is to acquire shares in index funds that reflect the MSCI World. This is not always entirely accurate, as the high number of shares would mean high costs and high expenditure for the fund company. For this reason, “sampling” is often used instead. This means that the fund does not include all the securities included in the index, but only the most statistically significant ones, which perform most closely to the index value. You have to consider in advance if this is what you want as an investor. If you don’t want a preselection made by others, you should always look out for a so-called “physically replicating” fund. Also with swap ETFs, many investors do not feel comfortable – however, the so-called “tracking difference” to the index with swap ETFs is often very small.

Additional selection criteria

There are plenty of points to think about. These include, for example, the consideration of whether one would like to have an accumulating or a distributing fund, rather a domestic or a foreign fund and similar issues. Tax aspects can also be important in individual cases, some investors may want a savings plan. Some prefer hedged funds, others want to hedge against currency fluctuations or even a fund already issued in euros. In a nutshell: when choosing a fund, you should always take your time, inform yourself sufficiently and think thoroughly in advance. ETFs are always advantageous – although they do not perform better than the index they represent, they also do not perform worse. And studies have shown for a long time that even well-managed funds can only very, very rarely outperform indices. Sic.

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Costs for index funds

Index funds are generally cheaper compared to actively managed funds. This is due to the fact that an active management of index funds (ETFs) is not needed, as they replicate the index as precisely as possible. How much an index fund costs can be seen from a very simple indication: the total expense ratio. It is always given in percentage and indicates how high the annual costs are in relation to the volume. The lower this value, the lower, of course, the costs. Many ETFs are significantly below 0.5% p.a. in areas, and many are only between 0.1% and 0.2%.

In addition to these costs, the costs for the broker and the trading centre must also be taken into account. There can be significant differences here, as our example below illustrates very clearly. We have examined an exemplary ETF at the MSCI World and determined the price differences of individual online brokers.

Our (exemplary) cost example

The example fund is the ComStage MSCI World TRN UCITS ETF (ISIN LU0392494562). Here is a brief overview of the fund’s key data:

  • reinvesting
  • USD
  • swap ETF
  • Domicile: Luxembourg
  • Total expense ratio 0.20 %
  • Savings plan possible
  • Fund volume 656,126,697.86
Costs at Captrader
The costs at Captrader are very easy to calculate: 0.10 % order fees (minimum 5 Euro) will be charged. The market fees are already included. Since custody account and account management are also free of charge, these order costs are the only ones that the investor has to pay at Captrader.
Costs at OnVista
OnVista currently (as of February 2016) has a very interesting offer for new customers: A free depot with a fixed price. All orders, both for equities and ETFs, cost only a flat rate of 5 euros, regardless of the volume. In addition, there are only 1.50 euro flat-rate market fees. This offer is hardly topable, especially with higher volumes. Some ETFs (mainly from ISHARES, unfortunately not our example fund) are even cheaper as special offer and can be acquired at a fixed price of 2.95 euros regardless of volume.
Costs at Heavytrader
Heavytrader‘ s cost structure is also very simple: Our fund costs 0.12% of the volume. The minimum fee is 1.99 euros, the maximum fee for orders is 69.90 euros. In addition, there are marektplace fees, which, however, are generally minimal for all marketplaces and are often in the cent-range for common orders.
If you want to compare the specific costs of your desired portfolio with different brokers, it is best to use our unique broker comparison calculator for a detailed and up to date comparison of your costs and fees.
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