S&P 500 or MSCI World ETF for long-term investing?

General
1

I’m 25 and started investing a year ago in the MSCI World ETF (IWDA). I’ve got $12K in it and so far, it’s up 22.37% (I know, it’s been a great year!).

But I keep questioning whether I should stick with the World ETF or start putting money into an S&P 500 ETF instead, since historically it seems to have better returns over longer periods. My plan is to invest for the next 20-30 years.

What would you do? Stick with the global diversification or shift to the S&P 500? Any advice would be appreciated!

2

Diversification helps reduce risk and can even increase returns over time. The S&P 500 is reliable, but global diversification might protect you from unknown future events. Nobody knows what the next 30 years hold.

3

@Peyton
If the S&P 500 drops, a lot of non-US companies will likely follow. They’re all interconnected these days.

4

Campbell said:
@Peyton
If the S&P 500 drops, a lot of non-US companies will likely follow. They’re all interconnected these days.

Not always true. From 2000-2008, non-US markets outperformed the US. Diversification worked then, and it could again in the future.

5

@Pierce
Sure, but even during that time, non-US markets didn’t exactly thrive. The US market was down 3%, and non-US was flat. It’s not as big of a win as people make it sound.

6

If you’re investing for decades, I’d go with the World ETF. It’s better to be diversified across regions.

7

Check out SCHD and SCHG. Both are excellent ETFs with solid returns.

8

You’re young. Consider adding some riskier bets like Nasdaq or emerging markets to your portfolio.

9

60% S&P 500, 40% Nasdaq (QQQM). Done. Keep it simple.

10

Dallas said:
60% S&P 500, 40% Nasdaq (QQQM). Done. Keep it simple.

Perfect advice. Don’t overthink it!

11

Why not both? The US has outperformed globally in the last 30 years, but that might not always be the case. Personally, I do 60% VOO (S&P 500) and 40% VT (Total World ETF).

12

At 25, it really doesn’t matter much. Pick either one and stick to it. Compound growth will work wonders over the next 20-30 years.

13

John Bogle (the creator of Vanguard) suggested investing in the S&P 500. His reasoning? US companies already operate globally, so you’re indirectly getting international exposure. Plus, S&P 500 ETFs often have lower expense ratios.

14

International ETFs can sometimes be over-diversified. I’d go with the S&P 500 and maybe add a tech-heavy fund like QQQ for growth. At your age, focus on simplicity and high-growth funds.

15

Skyler said:
International ETFs can sometimes be over-diversified. I’d go with the S&P 500 and maybe add a tech-heavy fund like QQQ for growth. At your age, focus on simplicity and high-growth funds.

You’re saying international indexes are over-diversified but recommending the S&P 500, which also underperforms its top performers. Doesn’t that seem contradictory?

16

@Jay
The S&P 500 has 500 stocks, while MSCI World has over 1,400. That’s why I think it’s over-diversified. Too many holdings can dilute returns.

17

Skyler said:
@Jay
The S&P 500 has 500 stocks, while MSCI World has over 1,400. That’s why I think it’s over-diversified. Too many holdings can dilute returns.

The S&P 500 isn’t the ‘best 500 companies.’ It’s just the largest by market cap. Most of them underperform the index itself over time.

18

@Jay
Fair point. But larger companies tend to have proven track records. I’m just saying it’s simpler to stick to a fund like SPY or VOO for most investors.