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MSCI and FTSE are two big names that you will probably come across when you start looking into investing around the world. You could say that they are the “map makers” of the stock market. They create indexes, which are lists of equities that many well-known funds track.
But here’s the thing: even if they both gaze at the world, they utilize distinct lenses to figure out what “global” means.
Choosing between them is really a big choice. The MSCI World Index alone has a float-adjusted market capitalization of more than $60 trillion. That’s a lot of zeros!
Choosing between MSCI World vs FTSE is not only about picking a label; it’s also about deciding if you want your money to stay in established “country clubs” or if you want to invest in new economies as well.
Quick Answer: MSCI World vs FTSE All-World
- MSCI World only tracks companies from developed countries.
- The FTSE All-World index includes both developed and emerging markets.
- There are a lot more countries and stocks in the FTSE index.
- Both of them are tremendously interested in the US market.
- One includes places like China and India, whereas the other does not. This affects how well they work.
- The choice typically depends on whether an investor prefers exposure limited to developed markets or broader global exposure including emerging markets.
MSCI World vs FTSE All-World: What Is the Difference?
The FTSE All-World index includes both established and developing economies. The MSCI World index, on the other hand, solely monitors developed markets.
Do you know what? A lot of people think that “World” refers to all the countries on Earth; however, in indexing, names can be a bit misleading.
There are around 23 developed countries in the MSCI World. The FTSE All-World, on the other hand, is essentially a “plus-sized” version.
It includes the same developed countries but also adds around 24 emerging markets. Because of this, the FTSE version gives you a piece of a much bigger pie.
What Is the MSCI World Index?
The MSCI World Index is an index of large and mid-sized businesses across 23 developed countries.
This is usually the “classic” global benchmark you’re looking for. It concentrates on economies that are already strong, such as the US, UK, Japan, and Western Europe. People who desire a smoother ride in more “predictable” markets often use it because it doesn’t include developing countries.
For decades, it has been the best way to get exposure to established markets.
What Is the FTSE All-World Index?
The FTSE All-World Index is a broad market benchmark that includes thousands of companies from both established and developing economies.
This index seeks to give a much broader picture of the world economy. It aims to cover over 90–95% of the world’s investable market by integrating countries such as Brazil, China, and India.
The term “All-World” could make you think it includes every stock in the world, but it doesn’t. It just catches a lot more fish than its MSCI counterpart.
MSCI World vs FTSE All-World Differences
Even though they have many of the same stocks, these two indexes differ in the sectors they cover and the number of firms they track.
Developed Markets Only vs Developed Plus Emerging
This is the most important one. The MSCI World stays in the “developed” group, but FTSE All-World lets the “emerging” crowd in. If a country’s economy is still growing or becoming more contemporary, it doesn’t join the MSCI World but does join the FTSE All-World.
Breadth of Coverage
The FTSE All-World inherently tracks more companies because it covers more nations. While the MSCI World can track only about 1,500 stocks, the FTSE All-World can track around 4,000 stocks. It’s just a longer list.
Diversification Differences
Diversification isn’t simply a buzzword; it means not putting all your eggs in one basket. The FTSE index has a wider range of countries.
But both indexes are “market-cap weighted,” which means the largest companies (such as those in the US tech sector) still have the most influence on how the indexes move.
Why Performance Can Differ
You might be thinking, “Does it really matter if they both have the same big US stocks?” Yes, it does.
The MSCI World vs. FTSE All-World comparison indicates that performance can vary significantly depending on market conditions.
Imagine it’s a year when big IT companies in Silicon Valley stay flat, but manufacturing in India and renewable energy in Brazil are both doing well. In this scenario, an investor in an FTSE All-World fund would see a big jump in their portfolio from those emerging gains, but an MSCI World investor would miss out because those countries aren’t on their “map.”
Which Index Is Broader?
The FTSE All-World is the broader index because it includes exposure to emerging markets that the MSCI World doesn’t.
Being broader sounds better, doesn’t it? Well, not all the time. The FTSE All-World covers more nations, but that “extra” coverage usually accounts for a smaller share of the total index.
Still, the FTSE All-World is the clear winner on scale if you want to hold as much of the global market as possible all at once.
Does MSCI World Include Emerging Markets?
No, the MSCI World Index includes only developed economies; therefore, emerging markets are not included.
Some people find this part puzzling. The MSCI ACWI (All Country World Index) is what you would look at if you wanted emerging markets under the MSCI brand. But the “MSCI World” index, which people talk about most, doesn’t include them at all.
The MSCI World won’t give you a chance to see the development potential (and risks) of developing countries.
How Do MSCI World and FTSE All-World Differ in Diversification?
The primary difference in diversification lies in geographic reach, as the FTSE All-World offers a more inclusive global footprint.
- Country Coverage: FTSE covers about 47-49 nations, while MSCI World covers only 23.
- Emerging Market Exposure: MSCI World gives you 0% exposure to developing markets, whereas FTSE All-World gives you about 10%.
- Sector Balance: Tech, Finance, and Healthcare are the largest sectors in both, but the companies that make up those sectors differ in each.
Why Might Tracked Funds Perform Differently If Both Are Global Indexes?
Funds operate differently because they use different rules for grouping countries and selecting which equities to include.
Different Market Coverage
MSCI and FTSE may not agree on what constitutes a “mid-cap” stock, even when they are looking at the same country. This means that the list of companies is not the same.
Different Methodology and Classification
One provider might say that a country is “developed,” while the other still thinks it is “emerging.” These small differences in the “rulebook” can lead to different returns over time. It’s like two cooks making the same dish but using different spices.
Rebalancing and Index Construction Differences
Indexes change throughout time; they get updated. If one index changes its list in March and the other in June, their performance will differ due to market conditions in those months.
Some trading platforms, such as STARTRADER, provide access to CFD instruments referencing global equity indices, allowing users to gain exposure to underlying market movements..
MSCI World or FTSE All-World: Which Suits Which Goal?
The right choice depends on whether you want your portfolio to include the volatile but high-potential development in emerging markets.
- Investors seeking a developed-market focus: The MSCI World is a good choice if you already hold an emerging-markets fund or just want to stick to established economies.
- Investors seeking broader global exposure: If you want to invest in many different places around the world, the FTSE All-World is usually the best choice. It covers practically everything, from Wall Street to Mumbai.
It’s not about whether one is “better”; it’s about which one works with your plan.
How Is MSCI ACWI Different From FTSE All-World?
The MSCI ACWI (All Country World Index) is very much like the FTSE All-World because they both include both developed and emerging economies.
Comparing MSCI World and FTSE is like comparing apples and oranges; two different things. Comparing MSCI ACWI to FTSE All-World is much closer; both aim for broad global coverage. The main differences are in the details of how they choose and weight different stocks.
What Should Investors Check Before Choosing an Index-Tracking Fund?
You need to look beyond the name and see how the fund actually works before you make a decision.
- What index does it track? Check whether it’s the one you really want (Developed vs. All-World).
- Are emerging markets included? Don’t guess; look at the factsheet.
- Cost structure: Check the expense ratio, which is how much they charge you to handle it.
- Breadth of coverage: How many equities does the fund really own compared to the index?
Quick Checklist:
- Does the name match the index?
- Is the “Total Expense Ratio” (TER) a good deal?
- Should I invest in Brazil, India, and China?
- Does the fund have a low tracking error?
Frequently Asked Questions
The FTSE All-World index includes 47 countries across developed and emerging markets. The MSCI World has only 23 developed-market countries.
Yes. There are thousands more enterprises and almost twice as many countries in it.
No, it is just for markets that are already developed.
They have varied guidelines for how to categorize countries, when to rebalance, and how many stocks to hold.
FTSE All-World is more diverse in a technical sense because it includes more countries and economies.
They are really similar! Both have emerging markets, but they use different methods to determine each stock’s value.
Check the price, the countries included, and whether the fund actually owns the stocks or only “samples” them.
No. An index is just a list (the “recipe”). An ETF is a product you buy that tries to follow that list (the “meal”).
Conclusion
Your opinion on developing markets is what actually matters when choosing between the MSCI World and the FTSE All-World. If you prefer a simpler, developed-economy focus, MSCI World is the way to go.
However, FTSE All-World may be more suitable for investors seeking broader global exposure including emerging markets. Just make sure to constantly look at the fund’s exact facts before you jump in.
Product Availability Notice:
This content is provided for general educational purposes only. Index benchmarks such as the MSCI World and FTSE All-World described in this article are not offered by the company. They are referenced solely for educational comparison purposes. Clients should refer to the company’s official CFD product offering for available instruments.
Risk Disclaimer
This is not investment advice but educational information. Investing involves risk, and the value of investments may go up or down. Past performance is not indicative of future results. You should consider your personal financial situation and seek advice from an independent financial adviser before making any investment decisions.
CFD Risk Warning:
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You may lose more than your initial investment. You should ensure you fully understand how CFDs work and consider whether you can afford the high risk of losing your money.
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