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I don't know if I'm getting the most profitable SRI / climate change ETF, can you help? (linux.community)

submitted 4 days ago by eli04@linux.community to c/personalfinance@lemmy.ml

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cross-posted from: https://linux.community/post/2819981

SRI ETF = social responsible index exchange trade fund

I'm a total newbie looking for one world ETF for a 30 year investment to keep it simple and to reduce risk.

ETFs I'm considering are

MSCI World SRI Index (USD) https://www.msci.com/documents/10199/641712d5-6435-4b2d-9abb-84a53f6c00e4

MSCI World Climate Change ESG Select Index (EUR) https://www.msci.com/documents/10199/84e37acb-a91e-8ff3-a909-6f8c7c6306dd

most people I asked know about the SRI but not about the climate change one. climate change's annual performance is way higher than SRI's. Very unsure about how to proceed.

Just to be sure, annual performance is way more important than the cumulative index performance - net returns, right? Because here climate change is better than SRI.

If I'm US based, is it better to invest in a USD denominated ETF or does it simply don't matter if I invest in a EUR denominated one (like climate change)?

How does trump play into all of this?

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[–] sugar_in_your_tea@sh.itjust.works 2 points 4 days ago

After some light research, SUWS is what I'd go for to trade the first index. I didn't see a suitable fund for that second for US investors.

annual performance is way more important than the cumulative index performance - net returns, right?

Don't buy funds based purely on past returns, but a fund because it fills some part of your overall investing strategy. I pick a set of indices as my target portfolio, and approximate it with funds that have low tracking error (returns largely match the index) and low net fees. If a fund doesn't track it's index well and outperforms in the recent past, there's no guarantee it'll continue and it could underperform going forward. Both indices are pretty new (10-15 years), so I don't think there's enough data to speculate about a 30-year time horizon.

I largely ignore returns when evaluating funds/indices, I care far more about fund composition. The top 10 holdings are very different between the two indices you linked. For example, one has Nvidia at 18% of the index and doesn't have Microsoft or Amazon, while the other has Nvidia at ~7.5% and does have Microsoft and Amazon. So it makes complete sense that they would have very different returns over the recent past since those three companies make up a large chunk of each index and their benchmark.

How does trump play into all of this?

Idk? He'd certainly have an impact on performance w/ tariffs, but I don't know which fund would have larger impacts. But you said you're looking at a 30 year investing horizon, so I dont think Trump is relevant here since he'll be out of office one way or another within that time horizon.

My biggest concern would be transaction fees buying the fund if you pick a EUR-denominated one, so ask your broker if you have a any questions about that.