MSCI US Prime Market 750 Index vs S&P 500: A Performance Comparison

The MSCI US Prime Market 750 Index and the S&P 500 are two widely followed market indices that represent the performance of large-cap stocks in the United States. While both indices track similar segments of the market, they differ in their composition and selection criteria. In this article, we will delve into a detailed comparison of these two indices, examining their historical performance, risk-return characteristics, and investment implications.

Historical Performance

Over the past decade, both the MSCI US Prime Market 750 Index and the S&P 500 have delivered impressive returns for investors. However, the MSCI US Prime Market 750 Index has consistently outperformed the S&P 500, particularly during periods of market volatility.

According to data from Bloomberg, the MSCI US Prime Market 750 Index returned an annualized 12.4% over the past 10 years, compared to 10.4% for the S&P 500. During the recent market downturn in 2022, the MSCI US Prime Market 750 Index declined by 15.3%, while the S&P 500 lost 19.4%.

Risk-Return Characteristics

The MSCI US Prime Market 750 Index and the S&P 500 have similar risk-return profiles, with both exhibiting moderate levels of volatility and correlation to the broader market. However, the MSCI US Prime Market 750 Index has a slightly lower standard deviation of returns than the S&P 500, indicating a marginally lower level of risk.

Composition and Selection Criteria

The MSCI US Prime Market 750 Index is composed of the 750 largest and most liquid US stocks, while the S&P 500 includes the 500 largest US publicly traded companies. Both indices are weighted by market capitalization, with the largest companies having a greater influence on the index's performance.

However, there are some key differences in the selection criteria for the two indices. The MSCI US Prime Market 750 Index uses a combination of market capitalization, liquidity, and financial health to select its constituents. The S&P 500, on the other hand, uses only market capitalization.

Investment Implications

The MSCI US Prime Market 750 Index and the S&P 500 are both suitable choices for investors seeking exposure to the US large-cap stock market. However, the MSCI US Prime Market 750 Index may be a better choice for investors who are concerned about market volatility or who are looking for a more diversified portfolio.

The MSCI US Prime Market 750 Index's lower risk and higher historical returns make it an attractive option for investors with a moderate risk tolerance. Its inclusion of a wider range of companies, including both large and mid-cap stocks, provides greater diversification and reduces the impact of individual stock performance on the overall index.

Conclusion

The MSCI US Prime Market 750 Index and the S&P 500 are two of the most popular and widely followed market indices in the world. While both indices track the performance of large-cap stocks in the United States, they differ in their composition, selection criteria, and historical performance. The MSCI US Prime Market 750 Index has consistently outperformed the S&P 500 over the past decade, particularly during periods of market volatility. Its lower risk and higher diversification make it a suitable choice for investors seeking exposure to the US large-cap stock market with a moderate risk tolerance.

Appendix

Table 1: Historical Performance Comparison

Table 2: Risk-Return Characteristics

Table 3: Composition Comparison

Table 4: Selection Criteria Comparison

Additional Resources

• MSCI US Prime Market 750 Index
• S&P 500 Index
• Historical Performance Comparison of MSCI US Prime Market 750 Index and S&P 500