DAX Index: An Interesting Step From The Stock Market Index Of 30 Big German Blue Chip Companies Traded On The Frankfurt Stock Exchange
The DAX Index is a market index of the 30 largest publicly-traded companies in Germany. The DAX is Germany’s main stock market index. It monitors the performance of the 30 largest German companies whose shares are traded on the Frankfurt Stock Exchange. They use the DAX Index as an indicator of the German stock market as well as the overall economic outlook for Germany and Europe.
They first created the DAX in 1987. The DAX represents the German equivalent of the DOW 30 in the US or the FT 30 in the UK. With DAX, it is possible to enter the German market easily, to benefit from the largest economy in Europe, and thus to take advantage of the opportunities in the global market as well as the domestic markets.
Currency in DAX Index: Euro
Against the popular belief of the German currency, the prices of stocks in the DAX Index are traded in Euro currency. For this reason, it is necessary to consider this difference when monitoring and interpreting.
Since the DAX trading currency is in Euros, any investor should assume the risk of trading in a foreign market. It should also consider the possibility of exposure to exchange rate fluctuations. In this respect, it is important to know the exchange rate risk before investing in the DAX.
Companies Included in the DAX Index
The DAX index consists of global companies. The companies listed in the index represent about 80 countries and any change in the world actually affects the DAX index. Siemens, Volkswagen, BMW, Adidas, Deutsche Bank, Henkel, Allianz and Bayer are just a few of the global companies included in the DAX index.
The DAX index is mostly made up of companies in the automobile and banking sectors. From this point of view, we would not be wrong to say that the DAX index is dominated by automobile and banking companies. Daimler, BMW, Volkswagen etc. All major German automakers such as Deutsche Bank and even Adidas, a clothing company, form part of the DAX index.
We can say that this index will be an ideal choice for any investor who wants to participate in a market that is heavily influenced by manufacturing companies, including those who want to take advantage of the opportunities in the global market as well as domestic markets.
Investing in the Dax Index
First of all, it is necessary to understand and analyze the difference between investing and short-term buying/selling in the stock market. Investing in Dax implies long-term ownership of index-related assets. It is also possible to trade on the Dax Index or offer short-term speculation on any financial instrument or commodity.
You’ll probably want to consider one of two routes to invest in Dax. The first is to buy an ETF or mutual fund that specifically tracks Dax or large-cap German stocks. ETFs will seek to match Dax’s performance both up and down. A mutual fund can try to do the same. But while passive investing is getting harder to achieve with the growing popularity of it, it can try to outperform the benchmark with active stock selection. Alternatively, you can invest directly in German stocks by choosing one of the components of the Dax Index. This will expose you to around 42% of Dax by market cap.
Dax Index trades effectively around the clock. The Dax is an index that represents both Germany and the wider export-led Eurozone economy as it is. It is also one of the most actively traded stock indices in the world.
The pre-futures contract typically trades more than 100,000 lots per day. However, the average level of volatility in the index since October 2017 is only 16.54% on a scale from 0 to 100. While this is a high level of volatility compared to other exchanges, it is still relatively low in the long run.