World vs. world quality
Facts, figures and data (as at 06/2024)
A few days ago, I shared a comparison between the MSCI World Index and the MSCI World Momentum Index on getquin, which was quite well received [1].
@FlorianoPerlini I suggested in a comment that I should also post a comparison with the MSCI World Quality Index. Since the World Quality Index has also been around for 30 years, there is nothing to be said against it. Here you go!
Stop talking, I'm here for the numbers!
All right. Here are the average annual returns of the MSCI World Index and MSCI World Quality Index over the last X years:
5 years, World: 13.31%, Quality: 17.31%
10 years, World: 9.71%, Quality: 13.17%
30 years, World: 8.32%, Quality: 11.88%
You can find the source at [2].
I suck at math. Impress me with absolute numbers!
If you invested USD 10,000 in the MSCI World 30 years ago, today it has become USD 109,966.28. If you had opted for the MSCI World Quality Index instead, you would now have USD 290,117.36 😳. Almost three times as much.
That is indeed impressive. What's the catch? Gigantic risk?
The max drawdown of the World over the last 30 years is 57.46%, that of Quality 48.01%. The Sharpe ratio is 0.43 for the World and 0.68 for Quality. You can find further comparative values at [2].
And now? Sell everything and switch to World Quality?
A comparison with the World Momentum Index [1] has already made it clear that this is a very good alternative or addition to a diversified equity portfolio. The World Quality Index adds another 0.62% average annual return compared to the Momentum Index and could therefore also be integrated into your own portfolio with a clear conscience.
Donkey, you're boring me! This post looks exactly like the one a few days ago when you compared World and Momentum 😠.
Okay, I'll let you in on a little secret. As I wrote in the last paragraph, you could put the World Quality Index in your portfolio with a clear conscience. If there was an ETF on it.
What are you talking about? I'll just get the $XDEQ (-0.83%)
and that's that.
But it's not based on the MSCI World Quality Index, but on the MSCI World Sector Neutral Quality Index. And the two are different. The MSCI World Sector Neutral Quality Index was launched in 1998 (Quality Index: 1994), 10-year performance at 10.28% / year (Quality Index: 13.17%), 5-year performance at 13.61% / year (Quality Index: 17.31%). The MSCI World Sector Neutral Quality Index still outperforms the MSCI World [3] over the long term, but not as clearly as the MSCI World Quality Index.
If you look at the comparison of quality ETFs from JustETF [4], there is actually no ETF listed that is based on the MSCI World Quality Index.
Your wisdom seems to be infinite. I think I'm in love 🥰. What ultimate tip do you have for me?
DYOR - do your own research. Get to grips with the products you're investing in and don't rely on superficial information. And certainly don't trust some random donkey on the internet.
Sources (the fact sheets are constantly updated, this article is not)
[2]
https://www.msci.com/documents/10199/344aa133-d8fa-4a15-b091-20a8fd024b65
[3] https://www.msci.com/documents/10199/f22aa42d-3d6b-478e-a4e4-26d56428ede4
[4] https://www.justetf.com/de/how-to/invest-in-quality-etfs.html
A comparison with the MSCI World Value Index and a summary of World vs Momentum vs Quality vs Value can be found here: https://getqu.in/TD3OT2/
