MSCI World ETF vs S&P 500 ETF: Which Outperforms Over 20 Years?
For two decades, European investors have debated the choice between an ETF tracking the S&P 500 index and an ETF based on the MSCI World. These two indices are among the most popular for broad exposure to international equities but have distinct performance and risk profiles. This article offers a rigorous comparative analysis of the 20-year performance, in euros, of MSCI World and S&P 500 ETFs, based on precise historical data and key indicators. We also break down the periods 2000-2010 and 2010-2020 to better understand the factors behind their respective variations, before concluding with a verdict tailored to intermediate-profile French investors.
Overview of the Indices and Representative ETFs
The S&P 500 is an index composed of the 500 largest U.S. capitalizations, primarily large-cap U.S. stocks. It is considered a barometer of the American economic health and benefits from a strong concentration in the technology and cyclical consumer sectors.
The MSCI World includes approximately 1,600 stocks from 23 developed countries, with the United States representing on average 65% to 70% of the weighting. This index offers broader geographic diversification, encompassing Europe, Japan, Canada, Australia, and other developed markets.
For comparison, we use two physically replicated ETFs popular in Europe:
iShares Core S&P 500 UCITS ETF (ISIN: IE00B5BMR087), TER 0.07%
iShares MSCI World UCITS ETF (ISIN: IE00B4L5Y983), TER 0.20%
Performances are calculated in euros, with net dividends reinvested, excluding brokerage fees.
Annualized Total Performance Over 20 Years (2003-2023)
Index / ETF
Average Annual Performance (in €)
Annualized Volatility
Sharpe Ratio (risk-free = 0%)
S&P 500 (iShares Core S&P 500 UCITS ETF)
+9.8%
16.5%
0.59
MSCI World (iShares MSCI World UCITS ETF)
+7.9%
15.2%
0.52
Over the long 20-year period, the S&P 500 ETF clearly outperformed the MSCI World in euros, with an annualized return of +9.8% versus +7.9% for the MSCI World. This outperformance is mainly explained by the American dominance in economic and technological growth, particularly marked during the 2010-2020 decade.
Decade-by-Decade Analysis: 2000-2010 vs 2010-2020
2000-2010: Difficult Decade, MSCI World More Resilient
The 2000-2010 decade was marked by two major crises: the bursting of the internet bubble in 2000 and the global financial crisis in 2008. During this period, the S&P 500 suffered from high volatility and stagnation in valuation:
S&P 500 annualized performance: approximately +1.2% in euros
MSCI World annualized performance: approximately +3.5% in euros
The MSCI World, thanks to its geographic diversification, better absorbed shocks, notably due to European and Asian markets which sometimes showed greater resilience. This ability to protect capital during downturns is a significant advantage for cautious investors.
2010-2020: Clear Domination by the S&P 500
The following decade was marked by the American economic recovery and global technological dominance. The S&P 500 index greatly benefited from the exceptional growth of the GAFAM (Google, Apple, Facebook, Amazon, Microsoft):
S&P 500 annualized performance: +14.5% in euros
MSCI World annualized performance: +11.2% in euros
The MSCI World followed the trend but with relative lag, notably due to a lower weighting in U.S. equities and exposure to less dynamic markets such as Europe.
Correlation and Diversification: A Key Factor
The correlation between the two indices over 20 years is very high, around 0.95, meaning their movements are largely synchronized. This reflects the strong American weighting in the MSCI World (65-70%), reducing the effect of geographic diversification.
Despite this high correlation, the MSCI World offers slightly more sectoral and geographic diversification, which can limit volatility in certain market contexts. Indeed, the annualized volatility is slightly lower for the MSCI World (15.2% vs. 16.5% for the S&P 500).
Impact of Fees and Taxation
The TER (Total Expense Ratio) is a non-negligible element over the long term:
S&P 500 ETF: 0.07%
MSCI World ETF: 0.20%
This difference, although small, affects net performance. Furthermore, French taxation on dividends and capital gains from ETFs is identical for both instruments, with a flat tax (Prélèvement Forfaitaire Unique, PFU) of 30% on generated income.
Verdict: Which ETF to Choose Based on Your Investor Profile?
Criterion
S&P 500 ETF
MSCI World ETF
Long-term Performance
Superior (+9.8%/year)
Good but lower (+7.9%/year)
Volatility
Slightly higher (16.5%)
Slightly lower (15.2%)
Geographic Diversification
Concentrated in the USA
Broad (23 developed countries)
Resilience in Crisis (2000-2010)
Less good
Better
TER Cost
Lower (0.07%)
Higher (0.20%)
In summary:
If you have a strong conviction in American growth and a good risk tolerance, the S&P 500 ETF is the optimal choice to maximize long-term performance.
If you prioritize broader international diversification and better protection during downturns, the MSCI World ETF remains a relevant option, with a more balanced risk/return profile.
For intermediate French investors, a compromise could be to combine both ETFs to benefit from American momentum while limiting concentration.
Conclusion
Over 20 years, the S&P 500 ETF clearly outperforms the MSCI World ETF in euros, with an annualized return nearly 2 percentage points higher. This outperformance was mainly built during the 2010-2020 decade, driven by American technological strength. However, the MSCI World proved its value during the 2000-2010 decade, offering better protection during crises. The very high correlation between the two indices limits diversification benefits, but the broader geographic allocation of the MSCI World can soothe investors less inclined to volatility. The final choice will therefore depend on your conviction about U.S. markets and your ability to tolerate the inherent volatility of a concentrated exposure.
