The global stock market includes a considerable number of countries. About 50 stock markets are of significant size. ETFs allow investors to invest in all those countries at the same time. For that reason, we will analyze the 7 most important world stock indices.
- MSCI ACWI
- MSCI ACWI IMI
- FTSE All-World
- S&P Global BMI
- S&P Global 1200
- S&P Global 100
- FTSE EPRA Nareit Global Real Estate
The world’s stock markets can be classified into 3 distinct categories: developed countries, emerging countries and frontier countries. All of them together form the global stock market. Obviously, not all of them are equally important.
The stock markets of developed nations are the largest in the world. Together, they represent approximately 90% of the entire market capitalization. About two-thirds of that value comes from the US equity market alone.
The stock markets of emerging countries represent approximately 10% of the global market capitalization. Some important countries fall into this category, including China, India, Brazil or, depending on which company is in charge of publishing the index, also South Korea.
Finally, frontier markets, where we find developing nations or countries with capital markets that are not easily accessible, represent less than 1% of global equity capitalization.
For this reason, most global stock indices include only developed and emerging countries. But it is possible to find some exceptions that also include frontier markets.
For those investors who wish to invest in the stock market in a geographically diversified way, below, we analyze 7 of the most important world stock market indices.
One of the most famous world stock indices is the MSCI ACWI, published by MSCI. ACWI stands for All Country World Index . Although, if we want to be accurate about it, it does not include all countries.
The MSCI ACWI is the result of consolidating the MSCI World index of developed countries and the MSCI Emerging Markets index for emerging nations. Frontier countries are not included.
In total, just under 3,000 companies from about 50 countries are part of the index. Because they are weighted based on their free-float-adjusted market capitalization, the largest ones tend to dominate. Some examples of these include Apple, Microsoft and Alphabet.
This index is very popular for ETFs and passive investing in general. If you want to find more details about it, you can visit the MSCI website.
MSCI ACWI IMI
The MSCI ACWI IMI is a different version of the MSCI ACWI that includes a greater number of stocks. This is because the minimum criteria regarding the size and liquidity that a company must have to be part of the index are lower.
Thus, more than 9,000 companies are part of the MSCI ACWI IMI. As you can see, the level of diversification here is extremely high. All these companies are from developed and emerging nations.
Obviously, many of these companies can be considered small-cap stocks. If you want to find more information about this index, you can visit this link to the MSCI website.
The FTSE All-World is a global stock market index published by FTSE Russell. This index is truly global, since it also includes frontier nations. Although, obviously, not all countries in the world are represented.
In total, more than 4,000 companies from some 80 different countries make up the FTSE All-World. This index includes both large North American multinationals and companies from very small countries such as Iceland or Latvia.
There are ETFs that will allow you to invest in this index passively. Here is the link to the FTSE Russell website.
S&P Global BMI
The S&P Global BMI is a world stock market index published by S&P Dow Jones that includes both developed and emerging countries. Approximately 50 nations are represented in it.
This index is the one that includes the largest number of companies. Some 14,000 corporations are members of the S&P Global BMI. This figure fluctuates over time depending on the number of companies that go public or that, for some reason, are delisted.
Here is the link to the S&P website in case you want to learn more about the index.
S&P Global 1200
S&P Dow Jones publishes other global stock indexes. One of the most interesting ones is the S&P Global 1200. This index is the result of consolidating 7 regional indices calculated by S&P.
Thus, the S&P Global 1200 includes all companies that are part of the US´s S&P 500, the S&P Europe 350, the Japanese S&P TOPIX 150, the Canadian S&P/TSX 60, the Australian S&P/ASX 50, the S&P Asia 50 and the S&P Latin America 40.
All of these companies are leaders in their respective regions, so putting them together in a single index makes a lot of sense. If you want to learn more about the S&P Global 1200, you can visit this link to the website of S&P.
S&P Global 100
The S&P Global 100 is a more concentrated version of the S&P Global 1200. Thus, the S&P Global 100 is made up of 100 of the most important companies within the S&P Global 1200.
In order for all 7 regions to be represented, those 100 companies are selected so that the weighting of each region resembles its allocation within the S&P Global 1200.
Obviously, the United States is the most important country within the index. And it is interesting to see that the United Kingdom ends up being the second country with the most stocks in it.
This index is another good option for passive investment funds. I leave you the link to the S&P website.
FTSE EPRA Nareit Global Real Estate
Finally, we will also take a look at the FTSE EPRA Nareit Global Real Estate, a stock market index of real estate companies from developed and emerging countries.
This index is a good option for those investors who want to generate income on a regular basis, or who want to protect the value of their capital from the harmful effects of inflation by investing in the global real estate market.
In the FTSE EPRA Nareit Global Real Estate we find both residential and commercial real estate assets, such as office buildings, hotels or warehouses. More details can be found on the FTSE Russell website.
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And if you would like to learn about the most important stock indexes of the largest emerging country, check out this link:
Top 10 Stock Market Indices in China