Don't invest in MSCI World!
42sContrarian advice that challenges a popular investment choice, sparking curiosity and debate.
▶ Play ClipAI Summary
The video presents a tax-efficient alternative to investing in a single MSCI World index fund. It argues that splitting the same investment into four regional index funds gives you more control over taxes when you start withdrawing money in retirement.
Chapters
[00:02]
MSCI World is diversified but tax-inefficient
MSCI World is a simple, diversified investment covering companies from 23 developed countries. Investing for years can indeed build a million euros, but the video warns against using only MSCI World.
[00:16]
Split into four index funds
Instead of one MSCI World fund, invest in four separate funds: S&P 500 (US), Europe, Japan, and emerging markets. This setup allows better tax planning.
[00:30]
The withdrawal scenario
Imagine you have €1 million and want to withdraw €40,000 per year. With MSCI World alone, you must sell from that one fund, and about €33,000 of the withdrawal is taxable profit.
[00:58]
Sell the fund with the least growth
With four funds, you can sell from the one that grew the least — in the example, Japan. Then only about €30,000 of the €40,000 withdrawal counts as capital gains, so you pay less tax.
[01:24]
Long-term savings
The yearly difference may be small, but over 20–30 years of retirement it can add up to tens of thousands of euros saved in taxes.
The same effort and the same million can be invested either way, but splitting into four funds keeps more control in your hands and less with the tax office.
Full Transcript
[00:02] a very easy and diversified way to invest because it includes 13 companies from 23 developed countries, and yes, if you invest for years you'll reach a million euros, that's correct, but don't invest in MSC World because since
[00:16] do better, shall we? You can invest in the same thing, but broken down into four different index funds, and then I'll explain why. Invest in the SP500, the United States, Europe, Japan and emerging countries, which in fact are not
[00:30] developed countries. Here we include emerging trends. This way you are planning very well for your future taxes. Imagine this scenario: you invest each month in the MSC World and reach one million euros, or you do the same, but
[00:44] with these four separate investments. Now you want to start living off your investments, which you deserve. You withdraw €40,000 every year. What will you do this year? You withdraw 40,000 from MSC World because you have no other option, of which about
[00:58] 33,000 is profit. You pay a portion to the tax office and that's it. On the other hand, if you had it broken down, you can see which one has grown the least, the one in Japan, in this example, to sell €40,000 of that index fund. Only Japan's,
[01:12] which has not had as many capital gains. Of the 40,000 you withdraw, roughly 30,000 are capital gains, which is less than before, therefore you pay less tax. You have flexibility because you organized yourself well fiscally. The
[01:24] difference may not be huge this year, but do the same during the 20-30 years you have for retirement and you will be withdrawing from your investments, and that could be tens of thousands of euros that stay in your pocket. And all because of watching
[01:37] this video. Same effort, same million, but one gives control to the Treasury and the other is in your hands. Follow me to make a difference. M.
