The Morgan Stanley Capital International (MSCI) World index and S&P 500 index are two of the most popular benchmarks for investment portfolios and for ETFs* (Exchange Traded Fund) investing.
* an ETF (Exchange Traded Fund) Is a stock that matches the return a given portofilo of stocks. The ETF is a fund with a backet of stocks that is basically the same as the stocks used for the index.
The MSCI rebalances on the last business day of February, May, August and November.
The correlation between MSCI and SPY is 0.63, which is considered to be moderate. This suggests that the two assets have some degree of positive relationship in their price movements.
The S&P 500 beats the MSCI Wordl during some years (e.g. 4/23-4/24) because of the MSCI volatality, but over the long haul the MSCI World does better.
| Index | Stocks | Foreign | Emerging Markets | Volatility 5yr | Sharpe Ratio * 5 yr | Expense ratio † | |||
| 10yr | 5 yr | 1 yr 4/23 - 4/24 |
|||||||
| S&P 500 | 503 | 0 | 0 | 2.7% | -0.5 to 3.0% | >0.09% | 12.9% | 14.3% | 29.0% |
| MSCI World | 1479 | 29% | 24 | 5.9% | 0.5 to 3.0% | 0.24% | 30.6% | 22.3% | 16.0% |
* Sharp Ratio
Both went below 0 in April of 2022
Sharpe Ratio - Reward to Variability Ratio. It's a mathematical expression of the insight that excess returns over a period of time may signify more volatility and risk, rather than investing skill.
Generally, any value greater than 1.0 is considered acceptable, while a ratio higher than 2.0 is considered very good, and a ratio of 3.0 or higher is considered excellent.
The Sharpe Ratio is its reliance on volatility as a measure of risk. It assumes that risk is synonymous with volatility, meaning that investments with high volatility are considered riskier than those with low volatility. However, this assumption may not always be accurate, as some investments with high volatility may not necessarily be riskier than those with low volatility.
Developed by William Sharpe, Nobel prize winning economist Sharpe Ratio: Definition, Formula, and Examples | Investopedia
Sharpe Ratio Calculator> | PortfoliosLab.com
I spent several hours trying to find what would cause such variability in the Sharp-Ratio. There were hundreds of web sites, bud none had a simple explination. Some comments were:
"For an ETF, Sharpe ratios don't really matter."
"There is actually a measurement I use which is refinement of the Sharpe ratio called the Sortino Ratio."
Volatility
Higher volatility indicates larger fluctuations and is considered to be riskier, but the MSCI World is more diversified so should give you slightly more stable results in the long long run (in theory).
† Expense Ratio:
An investment expense ratio is the annual fee paid to a mutual fund or exchange-traded fund (ETF) as a percentage of the investor's investments.
A reasonable expense ratio for an actively managed portfolio is about 0.5% to 0.75%
MSCI vs. SPY - ETF Comparison | PortfoliosLab.com
Over 10 years 2013-2023 the MSCI ver the past 10 years, MSCI has outperformed SPY with an annualized return of 30.68%, while SPY has yielded a comparatively lower 12.86% annualized return.
Over the last 5 years the MSCI return was 191%, while the SPY 98%
The MSCI World Index lost 31.3% of its value between February 16 and March 15, 2020, due to the economic impact of the COVID-19 pandemic.
COVID hit europe first.
In march 2020 there were 8.8 new cases per million while in the US it was 1.5
The MSCI had strong growth in the 1Q 2023 then fell at the end of April. According to The Motley Fool, MSCI stock fell 13.8% in April 2023, in part because some analysts lowered the price target for MSCI. For example, UBS lowered its price target from $611 per share to $570, citing slower growth in its ESG investing business compared to the previous quarter.
Sectors:
| Sector | S&P | MSCI |
| Information technology | 29.6% | 24.1% |
| Financials | 13.2% | 15.1% |
| Healthcare | 12.4% | 12.1% |
| Consumer discretionary | 10.3% | 19.9% |
| Communication services | 9.0% | 7.4% |
| Industrials | 8.8% | 11.1% |
| Consumer staples | 6.0% | 6.6% |
| Energy | 3.9% | 4.2% |
| Materials | 3.9% | 3.8% |
| Real estate | 2.3% | 2.3% |
| Utilities | 2.2% | 2.4% |
S&PIndex Top Holdings as of Mar 28 2024
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TOP 10 MSCI CONSTITUENTS April 2024
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Source: MSCI vs. SPY - ETF Comparison | ProtfolioLab.com
