Two World Indices, Twenty Years

There are two indices that global investors argue about more than any others. The MSCI World Index covers 23 developed markets — the US, Japan, the UK, Germany, Australia, and so on. The MSCI ACWI — All Country World Index — takes that same developed-market universe and adds 24 emerging markets on top: China, India, Brazil, Taiwan, South Africa, and the rest.

On paper, the difference sounds significant. In practice, over twenty years, it barely mattered.

The headline numbers

Measured over the twenty years to the end of 2024, in USD with dividends reinvested:

Why the gap is so small

The reason is mechanical. Both MSCI World and MSCI ACWI are weighted by market capitalisation. The United States makes up roughly 70% of MSCI World and roughly 63% of MSCI ACWI. When the US market moves, both indices move — regardless of what happens in the emerging markets sleeve.

Emerging markets are only about 10–12% of ACWI. Even in a year when emerging markets dramatically outperform or underperform, their weight is too small to move the headline number by more than a fraction of a percentage point.

Over the past twenty years, emerging markets actually delivered slightly lower returns than developed markets on a risk-adjusted basis. The extra diversification was real, but the extra return was not.

The regional indices

Adding a few single-region indices makes the picture clearer. Measured over roughly the same twenty-year window:

The FTSE 100 row is the one to sit with. The same index returned 2.6% a year or 6.6% a year — the only difference being whether dividends were counted. That gap compounds into a 2.5x difference in final wealth over twenty years.

2008: the crash that hit everything

Every index on this page was devastated by the Global Financial Crisis. The S&P 500 fell 38.5% in calendar year 2008 alone. Peak-to-trough from October 2007 to March 2009, the decline was 55.2%.

MSCI World fell 54.3% over the same period. MSCI ACWI fell roughly the same. FTSE All-World fell 55.8%. The emerging markets sleeve did not provide a safe haven — when global financial contagion spreads, correlations converge toward one.

Recovery took years. The S&P 500 did not make a new all-time high until March 2013 — about 66 months after the bottom. MSCI World took until June 2014. FTSE All-World until July 2014.

2021 and 2022: correction, then bear market

You mentioned 2021 as a correction year. Technically, 2021 was a strong year — MSCI World returned about 22%, and the S&P 500 returned about 28%. But the year contained two short pullbacks of about 5% each, one in September–October and one in November–December driven by the Omicron variant. Neither crossed the 10% threshold that defines a correction.

The real correction came in 2022. Rising inflation and aggressive interest rate hikes pushed the S&P 500 down 24.5% peak-to-trough. MSCI World fell 18.2%. FTSE All-World fell 17.3%. This was the first bear market since 2008 where global diversification genuinely helped — international markets held up better than the US.

What about VWCE?

VWCE — the Vanguard FTSE All-World UCITS ETF, accumulating share class — tracks the FTSE All-World Index. That index has a twenty-year track record: roughly 8.4% annualised, as shown above.

VWCE itself launched in July 2019. Its since-inception return is around 14.7% a year — but that captures a specific six-year window that included the post-COVID recovery and the AI-driven rally. Give it another fourteen years and the annualised figure will move.

The index data is what matters for long-term planning. The ETF is just the vehicle that delivers it.

Accumulating vs distributing — the quiet decision

Most major ETFs come in two share classes, and the choice between them matters more than people expect.

The mechanism is simple. A distributing ETF takes the dividends its holdings pay and sends them to you. An accumulating ETF takes the same dividends and buys more shares with them, inside the fund.

Over twenty years, that difference compounds. The FTSE 100 example from earlier is exactly this: 2.6% a year price-only, 6.6% a year with dividends reinvested. The 4-point gap is the dividends doing their work.

What actually determines your outcome

Looking across the two world indices and twenty years, three things mattered far more than which index you chose:

1. 1When you started. Starting in March 2009 versus October 2007 changes everything. The MSCI World return over a twenty-year window depends heavily on which twenty years you pick.
2. 2Whether dividends were reinvested. A 2.6% vs 6.6% difference on the FTSE 100 is the difference between a modest gain and a quadrupling.
3. 3Whether you stayed invested through 2008 and 2022. Every index on this list recovered. The investors who sold did not.

The gap between MSCI World and MSCI ACWI — roughly 0.3 percentage points a year — was the smallest of the three effects. Over twenty years it compounded into about $2,700 on $10,000. Real, but dwarfed by the impact of entry point and dividends.

Run your own numbers

The figures above are historical. They describe what happened, not what will happen. But the mechanics — compounding, dividends, entry point, time horizon — are the same mechanics your own portfolio will experience.

Change the return rate and watch the ending balance move. Change the fee and watch it move again. That's the whole exercise: understanding which levers are within your control and which aren't.

Sources and methodology

Return figures are approximate and drawn from MSCI index factsheets, FTSE Russell data, S&P Dow Jones Indices, and published market summaries. All returns are USD, with dividends reinvested (total return), gross of fund costs and tax.

Where sources disagree — as they do on the Swiss Market Index depending on the measurement window — both versions are noted. The core MSCI World and MSCI ACWI figures are consistent across multiple independent providers.