S&P 500 vs Russell 1000

When comparing the S&P 500 and the Russell 1000, I found a story of two distinct eras. From 1994 until today, the returns are practically identical with only a .01% annualized difference!

Source: Bloomberg

However, the S&P 500 beat the Russell 1000 by a wide margin from the common datas’ inception of 1978 to 1994.

Source: Bloomberg

Selecting a benchmark includes many factors, but I found the above interesting.


Source: Bloomberg

When comparing the MSCI World Index vs the MSCI All-Country World Index (ACWI) the other day, I was surprised by how closely they’ve tracked each other over the past 30+ years. Since their inception in 1988, the annualized difference is just .05%!

The MSCI World Index only includes stocks of developed markets (think the US, Western Europe, Japan, Canada, Australia, etc), while MSCI ACWI includes stocks in both developed and emerging markets (think China, India, Brazil, etc). Since emerging markets have bounced around between 10-15% of global market cap in the past decade (and were much smaller prior to that), the risk and returns of the MSCI World and MSCI ACWI indices have been nearly identical.

What does this mean for investors? Since the risks and returns of the indices are nearly identical, selecting an investment vehicle and cost structure may matter more than selecting the index. A fund investor might select MSCI ACWI due to the greater geographic diversification (especially with a large index fund that invests in local exchanges), while an SMA investor might opt for MSCI World due to cost considerations. Of course, the next 30 years could be completely different than the past 30 years!