Major Stock Market Indexes UK Investors Should Know
Two funds both called 'global' can own wildly different things. The label is marketing. The index it tracks is the bit that decides what your retirement actually rests on.
Major indexes UK investors should know
| Index | Holdings | US weight | Long-run return (nominal) |
|---|---|---|---|
| S&P 500 | 500 US large caps | 100% | ~10%/yr |
| FTSE 100 | 100 LSE-listed multinationals | Negligible | ~7-8%/yr |
| MSCI World | ~1,400 developed markets | ~70% | ~8-9%/yr |
| FTSE All-World | ~4,300 dev + emerging | ~62% | ~8%/yr |
| Nasdaq 100 | 100 non-financial Nasdaq | 100% (tech-heavy) | ~13-14%/yr |
| MSCI Emerging Markets | ~1,300 EM stocks | 0% | ~3-4%/yr (2010-24) |
Two funds both called 'global' can own wildly different things underneath.
Key takeaways
A stock market index is just a recipe for averaging the performance of a chosen group of companies, and almost every passive ETF you can buy in the UK tracks one.
For most UK investors, three indexes do almost all the heavy lifting: the FTSE All-World, the MSCI World, and the S&P 500. The others are slices of those.
Each index has hidden biases. The S&P 500 is roughly 30% tech. The FTSE 100 is heavy on energy, banks and miners. The MSCI Emerging Markets is dominated by Taiwan, China and India.
Long-run real returns from broad equity indexes have been roughly 5-7% per year over the past century, but that average hides huge multi-year drawdowns and decade-long underperformance for individual indexes.