S&P 500 vs MSCI World for EUR Investors

20 years of data, gold hedging, and which to choose for DCA

This is the most debated question among European investors: should you invest in the S&P 500 (pure US stocks) or the MSCI World (global developed markets)? We compared both using 20 years of EUR-denominated DCA data (2006-01 to 2025-12) to give a definitive, data-backed answer.

Performance Comparison (DCA in EUR)

Both indexes are tracked using EUR-converted monthly data since 2006. All returns below are from monthly DCA with no rebalancing, matching the calculator's default setting.

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The S&P 500 wins on every metric except diversification. It's delivered roughly 1.9% higher annual returns in EUR terms, driven by the dominance of US technology companies.

Why the S&P 500 Outperforms

1. US Tech Dominance

The S&P 500 is roughly 30% technology companies (Apple, Microsoft, Nvidia, Amazon, Alphabet, Meta). These companies have delivered extraordinary earnings growth that no other region has matched. MSCI World dilutes this exposure by including European and Japanese companies with slower growth.

2. Higher Profit Margins

US companies consistently maintain higher profit margins than European or Japanese peers. Less regulation, deeper capital markets, and a stronger startup ecosystem all contribute to this gap. The S&P 500 has also benefited from more aggressive share buybacks, which boost per-share earnings growth.

3. Lower Fund Costs

S&P 500 ETFs charge 0.05-0.07% TER. MSCI World ETFs charge 0.19-0.25%. Over 20 years of compounding, the 0.13% annual cost difference adds up to real money.

The Case for MSCI World

Geographic Diversification

MSCI World includes roughly 1,500 companies across 23 developed markets. Its approximate allocation:

• USA: ~70%
• Japan: ~6%
• UK: ~4%
• France: ~3%
• Canada: ~3%
• Other: ~14%

If US exceptionalism fades (tech regulation, fiscal problems, de-dollarization), MSCI World provides a safety net through exposure to other economies. However, at 70% US weight, it's not dramatically different from the S&P 500.

Lower Currency Risk

The S&P 500 gives you 100% USD exposure. MSCI World's roughly 70% USD weight means a dollar decline hits your portfolio less. That said, this risk is often overstated for DCA investors. Monthly investing naturally averages out currency fluctuations, and adding gold provides a more efficient currency hedge than switching from S&P 500 to MSCI World.

Adding Gold Changes the Picture

Instead of choosing between indexes for diversification, consider what happens when you pair each one with 30% gold:

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Adding 30% gold to either index cuts drawdowns significantly while keeping returns competitive. The S&P 500 + gold combination returned +350.8% nominal with just -21.4% max drawdown, compared to -46.8% for the pure S&P 500. Gold's tendency to rise when equities fall, and when the dollar weakens, makes it a natural complement for EUR investors holding USD-heavy equities.

Our Recommendation

For most EUR investors: use the S&P 500 for equities and add 10-30% gold for currency hedging and drawdown protection.

This approach gives you:

• Higher returns (roughly 1.9% annual edge over MSCI World)
• Lower costs (0.07% vs 0.20% TER)
• Better currency protection through gold's correlation with EUR/USD
• Lower drawdowns when paired with gold (-21.4% vs -46.8% pure S&P 500)

The only scenario where MSCI World is clearly better: if you believe US tech dominance is permanently over and you want geographic diversification as insurance. In that case, pair MSCI World with gold rather than holding it alone.

What About MSCI Europe?

If you want European exposure without MSCI World's overlap, consider adding a dedicated MSCI Europe ETF (like iShares Core MSCI Europe, SMEA.DE) alongside your S&P 500 position. Over 20 years, 100% MSCI Europe returned +130.4% nominal (+80.7% real) with a -53.9% max drawdown. That's well behind the S&P 500 at +390.0%, but it gives you explicit control over your US vs Europe allocation without paying for MSCI World's diversification premium.

Our DCA calculator includes both MSCI World and MSCI Europe so you can compare the results directly.

Frequently Asked Questions

Test It Yourself

Use our free DCA calculator to compare S&P 500 vs MSCI World portfolios with real EUR data since 2006. Try different allocations with gold, bonds, and money market to find your ideal mix.

For allocation advice, read our EUR investor guide.