INVESTING
Why a world stock index fund is hard to beat for passive investing
Broad world shares combine passive ownership, daily liquidity and diversification in a way few alternatives match.
Historical annualised real returns reported for the full 125-year record in the 2025 UBS Global Investment Returns Yearbook.
No investment is best for every person or purpose. For long-term money whose job is growth, however, a low-cost world stock market index fund has an unusual combination of strengths.
Three useful properties in one product
The fund follows an index. You do not need to choose companies or run a business.
ETF shares can normally be bought or sold during market hours, although the price can fall sharply.
One world fund can hold large and mid-sized companies across developed and emerging markets.
The historical return has been unusually high
The 2025 UBS Global Investment Returns Yearbook reported annualised real returns from 1900 to 2024 of 5.2% for world equities, 1.7% for bonds and 0.5% for bills. The 2026 Yearbook extends the record through 2025 and again describes equities as the top-performing liquid asset, although its public summary does not give the updated return for the world composite.
That advantage came with volatility. Shares can lose a large part of their value and take years to recover. Money needed soon may require cash or high-quality bonds instead.
Why not simply start a business?
A successful business can produce a much higher return. But the apparent investment return may include the owner’s work, expertise and unpaid risk. It is often concentrated in one company, difficult to value and difficult to sell quickly.
Property can provide income and diversification from shares, but transactions are slow and expensive, and management may become another job. Cash is stable in nominal terms and useful for near-term needs, but its long-run real return has historically been much lower.
A strong default is not the whole portfolio
A world index fund can be a strong starting category for passive long-term growth. It does not remove the need for an emergency reserve, suitable debt management or a mix that matches when the money will be needed.
With the default costs and 2.5% inflation, the calculator’s editable world-index starting point is about 4.78% after inflation and product costs, before personal tax*.
The full account lets users split money among world shares, government bonds, bank savings and their own categories, then change each expected return rather than forcing one answer on everyone.