Hey guys, it's sasha. I often talk about investing in the market as something that proves the best investing strategy in the vast majority of cases as many as 95 percent of actually managed funds lose out to the market that they're trying to beat, and the vast majority of retail investors will Fail trying to do the same thing, but what is the market if someone wants to invest in the market? What should you put your money into? Is it the s? P 500, that is usually the most popular choice. Is it the total u.s market is investing in the ftse better for uk investors, because a lot of people really think so what about the msci world index that tracks the global market? Well, let me explain exactly what these different options look like how they perform relative to each other and some important things to know so that you can go and make the best choice. Just a quick disclaimer.

I am not a financial advisor. This is not financial advice. I can't provide financial advice to you and if you do need financial advice, please make sure you're going to seek the help of a security qualified professional now. First, let me cover exactly what these different things are, because confusingly they are all often referred to as the market, so let's break down what these indices actually are and who which companies are in them.

First, off, let's talk about the biggest most popular one, the s p. 500. You may be more familiar with this one, because this is the one that everyone talks about, but it is basically just a list of the 500 largest companies in the united states and it is aggregated by standard and poor's. Hence s p, 500..

As a result, the list only includes high market cap companies and the biggest contributors are companies like apple microsoft, google, amazon and facebook. In fact, just those five companies on their own make up a whopping 21.5 percent of the entire s, p, 500. So the majority of your investment is going to sit with the relatively small group of the largest us companies and warren buffett's berkshire hathaway, which is the sixth biggest at the moment. The total u.s market is an index that matches small companies as well as those big ones into one big index.

There are several different ways that these indices can be calculated. One of the most popular ones is vanguard's vti. This index covers almost 4 000 u.s companies, ranging from small caps all the way to the biggest companies, and this index will give you a more comprehensive coverage of the market as a whole, but over 80 percent of this very index is actually made up of the Same s, p 500 companies with the 10 biggest ones, making up 22.4 of the total, so we are still largely investing in the s p 500 index, plus a few extras. On top now i live in the uk and i predominantly invest in the us market.

I'm going to explain exactly why in a second is because of the returns. But often people who live in the uk say that investing in the ftse 100 is a better choice. You don't have to pay for an exchange fees and there's no withholding tax and dividends, and if you live in some other country, you may face the same issue. But the truth is, the returns are just not there, but before we dive into the numbers, there's one more option: the global market.

Some people, like the concept of investing in companies, spread across different markets, different countries all over the world. To give you a complete coverage of the global economy, now this way, if one country does badly and another one, for example, does poorly, then you should get the benefit of the average of that global level of growth, a very common way to invest in the global Index is to invest in the msci world portfolio. This is a bit like the s p. 500.

There are a lot of similar options that use the same metrics with the ishares msci world being the largest by a long way. This index covers a list of 23 developed countries around the world and includes the 85 largest companies in each of those markets, which gives you a pretty comprehensive cover. It's a bit like having the s p 500 for each of those developed countries and then adding them all up into one big index. Now, if you look at the largest holding in there, you'll notice the same pattern.

The top 10 companies in this index add up to 15.6 percent of the whole market, and these are the biggest companies in the s p. 500. So, in fact, only one company in the whole of the top 20 largest companies in this index is actually not in the s p, 500 and that's nestle and the other 19 add up to 21.94 off the total index. So i think you're probably getting the picture now, if you're investing in any index that includes us companies, the s, p 500 will be the dominant driver of performance and the majority of your investments will be in the s p 500, but is it better to invest In just the s p, 500, or do you get an advantage if you go for one of the other options because of the extra companies that you get to invest in alongside well the s p 500, as an is an incredibly strong way to invest your money In the long term, if you look at the long term over the last 100 years, the s p 500 tends to return about nine percent per year on average, roughly before inflation.

If you reinvest the dividends, that's an incredibly good return, but as with everything in investing that return fluctuates for every year, like 2020, when we had absolutely crazy returns in the market. There are plenty of other years when the market is stagnant or even loses money over the course of the year. Now it is hard to compare these because different indices perform differently over different periods of time, but there is good data for all of these. Over the last 15 years, so i thought i'd just go with that.

It's not perfectly representative, but no particular time scale is in may 2006. The s p 500 index was on 1291 points and at the moment it is on 4246. So if you do, the math is about 10.35 per year, not bad at all, and obviously the last 18 months have pushed that higher than the average. Now, if you look at the vti index for the whole of the us market with all the smaller companies, it has actually done even better.

It's gone up from 64 to over 220 points, which is about 10.73 return, which is very high, but actually very similar to the s p. 500. The important note is that, historically, the s p 500 tends to do slightly better during bear markets and periods of stagnant, slower growth, whereas the vti, the old market index, tends to outperform during bull, runs or during times of high volatility. This is because small companies tend to actually be hit a bit harder during the harder times and they are slightly less robust, but they also tend to rise quicker and do better during times when things are exploding and doing really well because they're, starting at such a Low starting point now, a lot of people i know in the uk tell me that the ftse is where it's at, because investing in the uk is cheaper well in the same time frame.

The ftse 100 from may 2006 has gone up from 5657 points to 7178 points. That's almost two percent, exactly on average, even the ftse oh share index has only gone up two point: nine two percent in the same time frame. The fact is us: companies are dominating global economy, services and tech. If you are investing in us companies, you are de facto investing in companies that are covering more and more of the global market as time wears on, and unfortunately this means that if you invest in other countries around the world, the market share of big companies in Those other markets is dropping in their own backyard.

So for me there is absolutely no real point in investing in their ftse, even if i lose out slightly on taxes and fees, because the returns are not even remotely close, but what about the world index? What about the index that covers all the different companies in countries around the world? Well, the msci world index has grown by 10.45 on average since may 2006.. That is a very, very close rate of return to the s p. 500. In fact, it's only 0.1 percent.

More per year, but the etfs that are available for the s p 500 charge between 0.03 and 0.07, depending on where you live, the ishares swda msci world index charges not 0.2 and some of the other options charge even more so the net return after you take That to account is almost identical, so what does all of this mean? Well, the truth is large. American companies dominate the global economy and whichever market you're investing in you will largely be invested. In those same s, p 500 large companies. Some people like to have the diversification by investing in the total u.s market or global market, but, as you can see from these numbers, the returns of all of these are very, very similar.

The us and the world total markets can sometimes be slightly more advantageous, but they're also typically more volatile, and this is why the s p 500 is such a popular choice. It provides robust returns that are very, very difficult to beat, and it also limits your exposure to smaller high-risk companies and to more volatile markets. I hope you found this useful if you have i'd, really appreciate it. If you go and smash the like button for each the youtube algorithm so that more people can watch this video, thank you so much for watching.

I really really appreciate it and, as always i'll see you guys later, you.