What Is Germany's DAX 30 Index?

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DEFINITION

Germany's Deutscher Aktien Index, or DAX 30 Index, is a stock market index that consists of the 30 largest German companies trading on the Frankfurt Stock Exchange.

Germany's Deutscher Aktien Index, or DAX 30 Index, is a stock market index that consists of the 30 largest German companies trading on the Frankfurt Stock Exchange.

Definition and Example of Germany's DAX 30 Index

Germany's DAX 30 Index, also known as The DAX Index or The DAX for short, is a blue chip stock market index made up of the 30 largest, most actively traded companies listed on the Frankfurt Stock Exchange. It's a capitalization-weighted (or "cap-weighted") index. The weight of each individual security in the index is proportionate to the total market capitalization.

  • Alternate name: The DAX Index; the DAX

The weight of any single company may be no more than 10% of the DAX capitalization.

How Germany's DAX 30 Index Works

The DAX is a part of the DAX Index family. It's sponsored by the Deutsche Börse Group. The index was published on July 1, 1988.

Many DAX constituents are large multinational companies that have a high level of significance to the global economy in addition to the German domestic market. The index represents 80% of the total market cap of listed German stock corporations, making it an important benchmark for domestic and international investors.

You can use the index to draw comparisons between its 30 individual constituents or companies. This allows you to determine which companies perform similarly so you can maximize your returns. It's similar to the Dow Jones Industrial Average (DJIA) in the United States in this sense.

The index uses two key selection criteria to determine which companies it includes in its portfolio to serve as a reliable benchmark for such comparisons:

  • Maintaining its order book turnover in the past 12 months on the Xetra trading system and the Frankfurt trading floor
  • Having free-float market capitalization on the last trading day of a month

The free-float method of calculating market cap excludes locked-in shares, such as shares owned by a company's executives.

Constituents must generally have their shares listed in the Prime Standard segment (a segment of the EU-regulated market) to comply with these criteria. They must have a minimum free float of 10%. They should maintain their legal or operating headquarters in Germany. Foreign companies should have a presence in the European Union or an EFTA state. They should continuously trade on Xetra, with a minimum period of 30 trading days since their first listing.

The constituents are subject to review each quarter. They may be added or removed based on changes in their market cap.

The index is calculated on a second-by-second basis using Xetra prices. Although it can be viewed as a performance or total return index, it's calculated both as a price index that purely tracks the price performance of its constituents and as a total return index where income from dividend and bonus payments in the DAX portfolio is reinvested.

The DAX family of indices also includes the MDAX, SDAX, and TecDAX indexes.

What It Means for Individual Investors

The DAX portfolio includes 30 companies in total, including these 10 globally recognizable firms as of June 2022:

  • Adidas AG (ETR: ADS): Adidas AG is a designer and developer of athletic and sports lifestyle products, including its famous line of shoes.
  • BASF SE (ETR: BAS): BASF SE is one of the largest chemical companies in the world, operating across several different segments.
  • Bayer AG (ETR: BAYN): Bayer AG has developed one of the most popular pain relief drugs in the industry and remains a healthcare giant.
  • BMW AG St. (ETR: BMW): BMW AG is an automobile manufacturer with a lineup of award-winning brands that are recognized around the world.
  • Deutsche Bank AG (ETR: DBK): Deutsche Bank AG is one of the world's largest banks, with products and services targeting individuals and businesses worldwide.
  • Infineon Technologies AG (ETR: IFX): Infineon Technologies is a semiconductor and complete solutions provider for microelectronic applications.
  • Deutsche Telekom AG (ETR: DTE): Deutsche Telekom is one of the largest integrated telecommunications companies in the world.
  • Merck KGaA (ETR: MRK): Merck KGaA is one of the largest pharmaceutical and healthcare companies in the world.
  • Siemens AG (ETR: SIE): Siemens AG is a provider of electronics and electrical engineering services aimed at a broad array of market sectors.
  • Volkswagen AG Vz (ETR: VOW3): Volkswagen AG is an automobile manufacturer famous for its "Beetle" cars.

How to Invest in Germany's DAX 30 Index

International investors can gain exposure to The DAX using a number of exchange-traded funds (ETFs) that trade on European exchanges. They may also buy individual constituents of the index. Some of these companies trade as American depository receipts (ADRs) in the U.S., but others only trade on foreign exchanges so international investors might need foreign or global brokerage accounts to purchase them.

Here are five popular ETFs that track The DAX and trade on European exchanges if you don't mind getting a global or foreign brokerage account:

  • iShares Core DAX UCITS ETF (FRA: EXS1)
  • X-Trackers DAX UCITS ETF (FRA: DBXD)
  • ComStage DAX UCITS ETF (FRA: C001)
  • Lyxor DAX UCITS ETF (FRA: LYY7)
  • Deka DAX UCITS ETF (FRA: EL4A)

Alternatives to Germany's DAX 30 Index

International investors seeking alternatives to The DAX have several options. The iShares MSCI Germany Index ETF (NYSE: EWG) is the most direct way to invest in Germany using a U.S. exchange, but there are other funds with exposure to Germany. Some German companies not listed on the DAX may trade as ADRs on U.S. exchanges and are potentially good investments.

Here are some other popular ETFs with German exposure:

  • Vanguard FTSE Europe Index Fund ETF (NYSE: VGK)
  • SPDR DJ EURO Stoxx 50 ETF (NYSE: FEZ)
  • iShares MSCI Eurozone ETF (NYSE: EZU)

Look at how these ETFs are weighted and the expense ratios associated with the funds to make sure they're the right fit for your portfolio.

Key Takeaways

  • Germany's DAX 30 Index is a blue chip stock market index containing 30 of Germany's largest companies, including globally recognizable firms like Adidas and Bayer.
  • It reflects the state of the German domestic and global market and can be used by investors to compare and predict the performance of its constituents.
  • U.S. investors who want to invest in the DAX portfolio can do so through ADRs or get international brokerage accounts for constituents that only trade on foreign exchanges.
  • U.S. investors can also get exposure to the German market through other ETFs available on U.S. exchanges.

Article Sources

  1. U.S. Securities & Exchange Commission. "Credit Suisse AG."

  2. Deutsche Börse Group. "30 Years of DAX. From Frankfurt. for the World."

  3. Deutsche Börse Group. "DAX – Benchmark and Barometer for the German Economy."

  4. Borse Frankfurt. "Price and Sales Data."