MSCI World ETF: Performance, Risks, and Diversification Strategies

The MSCI World index climbed approximately 22 percent over the course of 2025, according to official data reported by financial outlets. Despite that performance, market analysts point to a growing concentration risk as a handful of United States technology giants dominate the global benchmark. Official fund data from iShares reveals that the ten largest positions in the index accounted for roughly 27 percent of total fund volume at the turn of the year.

NVIDIA led the list with an approximate 5.5 percent share of the total ETF volume, followed by Apple at roughly 4.9 percent and Microsoft at about 4.1 percent. The collective weight of the major technology companies known as the Magnificent Seven—comprising NVIDIA, Apple, Microsoft, Amazon, Alphabet, Meta, and Tesla—exceeds one-fifth of the entire index. Furthermore, companies based in the United States now account for more than 70 percent of the MSCI World holdings.

Performance Divergence and Currency Headwinds

A pure focus on the index headline figures overlooks significant currency and regional discrepancies, according to Ali Marsawah, managing director at the investment consultancy Envestor, speaking to Handelsblatt. For investors within the euro zone, returns were more than halved over the period due to the weakness of the United States dollar.

The MSCI World also lagged behind other major equity benchmarks during 2025. While the MSCI World posted a gain of 21.6 percent, the MSCI Emerging Markets index advanced by 34.4 percent, and the MSCI European and Economic Monetary Union index surged 40.3 percent. Marsawah argues that the MSCI World has ceased to function as an effective diversification tool in recent years for investors seeking to spread risk across multiple separate markets.

Expert Recommendations on Geographic Diversification

Michelle Gibley, director of international equity research at United States-based broker Charles Schwab, suggests in an outlook commentary that the prolonged era of United States market dominance may be nearing a temporary halt. Gibley points to potential growth in Japan and Germany driven by stimulus measures, alongside China’s ongoing investments across diverse technology sectors.

To mitigate concentration risk, financial analysts highlight several alternative strategies for portfolios. Investors can utilize an MSCI World ex USA index to systematically exclude United States equities, or select broader geographical options such as the MSCI ACWI or the FTSE All-World. Those broader indices incorporate emerging markets in regions such as China and India, which firms like JPMorgan identify as sources of alternative growth opportunities.