What Should Investors Know about the Dax 40?

Dax 40 | What Should Investors Know about the German Index

The Deutscher AktienindeX or the Dax 40 represents 30 of the most liquid and large, blue chip companies in Germany. These companies are also listed and traded on the Frankfurt Exchange. 

Index trading is a popular investment option for those who do not want to invest in separate stocks, but they instead add a list of companies in their trading portfolios. Each index includes a basket of individual shares from the major companies in a country. To identify the value of an index, whether it is the AEX, NASDAQ 100, ASX 200, or FTSE 100, investors have to pay attention to political events, industry news, economic data, and significant changes on the stock market.

Since it first emerged 30 years ago, DAX member companies have grown to represent as much as 75% of the aggregate market cap value on trades on the Frankfurt Exchange. 

Prices listed on the Dax 40 index are based on the electronic trading system, Xetra. The actual calculations are also based on a free-float model which focuses on the index weightings and a measure of the average trading volume. 

Unlike most indexes around the world, the Dax 40 is updated with futures prices for the following day, even if the primary stock exchange is closed. Changes are also made on regularly scheduled review dates. However, members of the index can be added if they break the top 30 or removed if they don’t rank in the top 30 companies anymore. 

Several companies listed on the DAX are also large multinationals who play a significant role in the global economy. This makes it important for investors to keep a close eye on global events that can potentially influence the market. 

Key companies listed on the Dax

If you want to get a good idea of how both German and European markets are faring, you have to look at the most popular benchmark in the region, the DAX. The companies listed on the Dax 40 are mostly recognizable because of their presence in international markets. 

Some of the companies listed are as follows: 

  • Adidas
  • Bayer
  • BMW
  • Deutsche Bank
  • Siemens
  • Volkswagen

Investors seeking to gain exposure to the Dax 40 can do so through various exchange-traded funds (ETFs). But this doesn’t mean that investors can’t invest in individual components on the index. 

However, individual foreign investors will need to have a foreign or global brokerage account to engage in trading. 

Some popular ETFs that help foreign investors enter German markets are as follows: 

  • iShares MSCI EMU Index ETF
  • iShares MSCI Germany Index Fund ETF
  • MSCI European ETF
  • SPDR DJ EURO Stoxx 50 ETF
  • Market Vectors Germany Small Cap ETF

If you’re considering any of the ETFs listed above, you should also do your homework to understand how they weighted and the expense ratios that are directly related to the funds. This approach is important to ensure that it’s a right fit for your investment portfolio.

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Written by:
Omer Aragón Godínez

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