The first tracks the US S&P 500 index, while the second focuses on the global MSCI World index. Although both instruments offer broad risk diversification and long-term growth, they differ in their structure and behaviour during different phases of the economy.
S&P 500 – the largest companies in the US market and the role of technology leaders
An ETF that replicates the S&P 500 index tracks the performance of 500 of the largest US companies, which together represent a significant part of global equity markets. The United States has long acted as an engine of the global economy and a leader in innovation. This is naturally reflected in the performance of US equity markets. In recent years, the top of the index has been dominated mainly by technology giants with enormous market capitalisations. These companies have an exceptionally strong influence on the performance of the entire index.
The concentration of this index has both advantages and disadvantages. On the one hand, investors gain the opportunity to participate in the rapid growth of the technology sector, which is often among the best-performing segments globally. As a result, the S&P 500 can generate markedly above-average returns during periods of prosperity, especially when technology leaders succeed in launching new products or expanding into new markets. On the other hand, this concentration also means greater sensitivity to any slowdown in the US economy or regulatory measures targeting technology companies. Investors must therefore expect higher volatility, along with faster and more pronounced changes in the value of their portfolio.
Even so, the S&P 500 can be considered a highly diversified index because it includes companies from a wide range of sectors, from healthcare and finance to industry and energy. However, the influence of several dominant companies at the top of the index remains a significant factor determining its performance.
MSCI World – broader geographical diversification
Next, we have the MSCI World index, which includes companies from developed economies around the world. Here too, the United States accounts for approximately two thirds of the total weighting, but the index also includes companies from Europe, Japan, Canada and Australia. This geographical diversification helps reduce the risk associated with the performance of a single economy or sector.
The advantage of this approach is more stable long-term development. While the S&P 500 can be strongly influenced by the performance of just a few companies, MSCI World can spread risk across dozens of different economies and sectors. This may be particularly attractive for investors looking for a more conservative solution and preferring a more balanced portfolio dynamic. On the other hand, this global index usually grows at a slower pace than the S&P 500.
Model scenario: regular investing
The model investor buys USD 100 of the selected ETF every three months, regularly and regardless of the current market situation. Over the past five years, from 1 October 2020 to 1 October 2025, this results in 20 purchases, meaning a total investment of USD 2,000, about £1,600.
This approach, known as dollar-cost averaging (DCA), eliminates the need to monitor the market and decide when the ideal time to buy is. The investor therefore automatically buys during both rising and falling markets, averaging the purchase price. In practice, this means that when the market falls, the investor buys more fund units for the same amount.
If we apply this approach to investing in an ETF tracking the MSCI World index, the indicative return on the regular investment comes out at approximately 86% over the past five years, so the value of the original USD 2,000 investment would have risen to around USD 3,720. For the more dynamic S&P 500 index, the same regular investment would have led to an even higher indicative value, for example USD 3,800, thanks to its stronger performance over the period.
However, it is important to emphasise that higher returns are usually accompanied by higher volatility and therefore larger price fluctuations in the case of the S&P 500. An investor who prefers a smoother journey and lower fluctuations may therefore value the global diversification of MSCI World, while a more dynamically oriented investor may instead seek the higher-performing, but riskier, S&P 500.
Lump-sum investment
If you had invested USD 2,000 in MSCI World as a lump sum, you would have earned USD 1,950 over the five-year period shown. In the case of the S&P 500 index, the gain would have been USD 2,200.
Comparison: lump-sum versus regular investments
If we compare regular purchases with a lump-sum investment of USD 2,000, about £1,600, at the start of the investment period, 1 October 2020, then during a period of strong market growth it is usually more advantageous to invest everything at once. This allows the capital to work for longer and fully participate in market growth.
In the case of the MSCI World fund, a lump-sum investment of USD 2,000 could, in our model example, have reached a value of USD 3,950, a return of 97.5%, thereby outperforming regular purchases, which reached USD 3,720.
In the case of the S&P 500, the difference would have been even more pronounced: the lump-sum investment could have reached up to USD 4,200, meaning that if you had bought the S&P 500 in one transaction five years ago, you would have earned substantially more than by investing gradually.
If, however, you fail to time the purchase correctly, the outcome may be the opposite, meaning that gradual purchases may prove more beneficial. Since it is often difficult to time purchases correctly, regular purchases tend to deliver more stable returns.
Comparison of the two strategies shown in a clear table
This covers the period from 1 October 2020 to 1 October 2025.
| Strategy | Index (ETF) | How did we invest? | Investment | Final value | Profit in USD |
|---|---|---|---|---|---|
| Regular (DCA) | MSCI World | USD 100 every 3 months | USD 2,000 | USD 3,720 | + USD 1,720 |
| Lump-sum | MSCI World | USD 2,000 immediately at the start | USD 2,000 | USD 3,950 | + USD 1,950 |
| Regular (DCA) | S&P 500 | USD 100 every 3 months | USD 2,000 | USD 3,800 | + USD 1,800 |
| Lump-sum | S&P 500 | USD 2,000 immediately at the start | USD 2,000 | USD 4,200 | + USD 2,200 |
Note on fees
Let us add an important note on fees. It is important to remember that every purchase of ETFs or shares should include the trading commission, meaning the broker’s fee.
Because each broker has a different fee structure, whether fixed, percentage-based or offering free purchases, these commissions are not included in our model examples, but with frequent regular purchases they can significantly affect the total return.
Final summary
MSCI World offers broad geographical diversification, lower volatility and more balanced growth. The S&P 500 may offer a higher return, but it also carries potentially higher risk and greater sensitivity to developments in the US economy and the technology sector.
Regular investing is suitable for investors who prefer to build their portfolio gradually and want to minimise the impact of market timing. A lump-sum investment may be more advantageous in a strongly rising market, when the capital starts working immediately in full.
The same principles also apply when investing in individual shares. In that case, however, the investor selects the companies independently and bears full responsibility for those decisions, which brings higher risk, especially due to lower diversification. ETFs significantly reduce this risk because they already contain a broad spread of investments.
Investing is a personal matter for each of us. It is always influenced by each investor’s individual goals, risk tolerance, investment horizon and overall financial situation.
This article serves as a comparison of different approaches and shows how different strategies can affect the long-term result, but it does not constitute investment recommendations or investment advice.