Why are world ETFs considered high risk?

External question — Personal Finance Stack Exchange Author: tellis Original post: https://money.stackexchange.com/questions/163519 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. I am in Austria, and am investing in ETFs via one of the big brokers in Germany (Flatex), with a view to holding on to them for many years. Brokers like Flatex require private customers to define their 'risk class' on scale from 1 to 6 or similar, and classify investments into each category as well. The system won't let you invest in a product that is above your risk level, which makes sense. I frequently see ETFs tracking a 'global' index, like the MSCI World, touted as a solid investment because they are broadly diversified and often have low expense ratios, at least in the German-language press ( example , in German). I was surprised to learn that Flatex considers ETFs tracking global indices to be in the riskiest category of 'complex financial products'. Can anyone explain why this is? My guess is that this is because they can be volatile in the short term, even if they tend to grow in the long term (?). Another idea is that they include investments in countries with currency or political risks, but it cannot be this because Flatex considers ETFs in "emerging markets" to be substantially less risky.

External answer — Personal Finance Stack Exchange Author: Solarflare Original post: https://money.stackexchange.com/a/163524 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. Flatex considers everything not trading in EUR as higher risk, and the MSCI World trades in USD. (Should not be maximum risk, though, but 5 out of 6, otherwise you might have the wrong product, so maybe double check.) This is a very broad classification just based on some general product characterisics, not on the specific product (or e.g. its specific volatitily), and does not actually try to tell you if an ETF on the MSCI World is riskier than e.g. an ETF on the ATX. Adding a different currency just adds some complexity that Flatex wants you to acknowledge. For a product specific evaluation, EU regulations require every product to (self-)certify their risk level and publish it. As an example, the "Basisinformationsblatt" for the Xtrackers MSCI World UCITS ETF notes a risklevel of 4 out of 7, which probably matches your (and the press') assumption much better.