The Risk–Reward Principle I Didn’t Explain Clearly in My Article on Cyclical Opportunities
If I take a certain risk, how much can I gain — and how much can I lose?
1 March 2026
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Hi, I’m Richard. On this blog I share my thoughts, not investment advice. This is not a recommendation to buy or sell securities.
How to Start Investing in an Index ETF
How to start investing in ETFs
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I have already written about my approach to money and how I began investing. I've also discussed the importance of time in investing and why starting as soon as possible is crucial due to compound interest. Now, I will describe how to start investing and what to watch out for.
Investing in Individual Shares vs. Stock Market Index ETF
I will not focus on investments in individual shares. For most people, this is an inappropriate form of investment. The smartest minds on the planet, along with sophisticated algorithms, are dedicated to it. It's like playing football against Messi—nonsense for most of us. It makes more sense to benefit from the fact that the stock market grows in the long term. That's what I will focus on today: profiting from the stock market's long-term growth by investing in the world stock index.
What is a Stock Index?
A stock index is like a summary of how a group of companies is performing. Instead of checking each company one by one, the index gives you a quick look at how the whole group is doing. If it’s going up, the group is doing well. If it’s going down, they’re having a tough time.
The Developed World Stock Index
So far in 2024, the MSCI World index has returned an average 11.75 %.
The developed world stock index (the MSCI World Index) has an average annual growth of more than 10%. I explained what an annual compound interest of 10% means in my previous post. I recommend reading it; understanding this concept motivated me to invest. Knowing that the entire stock market of the developed world grows at more than 10% per year, investing becomes an absolute no-brainer for anyone who thinks even a little about the future.
How to Invest in the World Stock Index
The answer is through ETFs (Exchange-Traded Funds).
What is an Index ETF?
Think of an ETF as a mix of different investments all packaged together. When you buy a share, you get a part of everything in that package. An index ETF is a type of ETF that follows a particular stock index. It’s like buying a pre-made collection of all the stocks in that index, making investing easy and diversified.
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Disclaimer
This article is intended for informational and educational purposes only. It does not constitute financial advice, a recommendation to buy or sell any securities, or a guarantee of future market performance. The views expressed are solely those of the author, who may also be an investor. Investing in financial markets involves risk, and each reader should make their own decisions independently and, if necessary, consult with a licensed professional.
Summary
Investing in individual shares is like playing football against Messi. For most people, a world stock index ETF is a better path — with an average annual growth above 10%. This article explains how to choose one, why accumulative funds save on taxes, and why fees matter more than most investors think.
Sources
MSCI World Index factsheet: MSCI
Common questions about this topic?
What is a stock index ETF?
An ETF (Exchange-Traded Fund) is a fund that tracks a stock market index and trades on an exchange like a regular stock. Instead of picking individual companies, you buy a small piece of hundreds or thousands of them at once. For most retail investors this is simpler, cheaper, and statistically more effective than selecting individual stocks.
What is the MSCI World Index?
The MSCI World Index tracks over 1,500 large and mid-cap companies from 23 developed countries. It has historically delivered approximately 9–10% average annual returns since the 1970s. It is one of the most widely used benchmarks for global developed-market equity performance.
What is TER and why does it matter?
TER (Total Expense Ratio) is the annual fee charged by the ETF provider. A MSCI World ETF typically has a TER of 0.10–0.20% per year. Small as it sounds, over 20–30 years of compounding even a 0.1% difference can cost thousands of euros. Use platforms like justETF to compare fees across similar funds.
How much money do I need to start investing in an ETF?
You can start with very small amounts — many platforms allow monthly investments from as little as 25 or 50 euros. In the article, the key message is that the amount matters far less than starting early and investing consistently. A strategy called dollar cost averaging — investing a fixed amount at regular intervals regardless of market conditions — removes the pressure of timing the market and averages out your purchase price over time.
Accumulating or distributing ETF — which should I choose?
An accumulating ETF automatically reinvests dividends back into the fund, growing your investment through compounding. A distributing ETF pays dividends to you as cash. For long-term investors focused on building wealth, accumulating is generally more tax-efficient and produces stronger compound growth over time.
What mistakes do beginners make when choosing their first ETF?
Common mistakes include focusing too much on short-term performance, choosing distributing ETFs when accumulating would be more tax-efficient for long-term growth, ignoring the TER (annual fee) which compounds over decades, and selecting synthetic rather than physically replicated ETFs without understanding the difference. In the article, the emphasis is on keeping it simple: choose a well-known MSCI World ETF with low fees, physical replication, and accumulating dividends — then invest consistently every month.
If you have any thoughts, questions, or feedback, feel free to drop me a message at mail@richardgolian.com.