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One can follow the situation on the stock market of a certain country by analyzing one of the composite indices. For example, looking at the NASDAQ, one can see the overall picture of what is going on in the high-tech sector in the US, or looking at the Nikkei, one can see how Japanese companies are doing. We will talk about one of the most popular indices among investors — the German DAX.
What is the DAX index companies
What is the DAX 30 index? The Deutscher Aktienindex was presented to investors on August 1, 1988. The current DAX index fund includes the 30 largest companies in Germany:
- credit institutions;
- engineering groups;
- Healthcare and pharmaceutical companies;
- media business;
- logistics companies.
If you look at the graph of the index from the beginning of its existence and to the extreme quotation marks, you can see a steady upward trend. The price is constantly rising, despite periods of recession, which knock out of the market inattentive participants. This can be seen in the dax index history. Not to be among them, you need to act carefully when choosing a German stock index for investment.
How the DAX Index is calculated
Calculating the DAX Index is based on the Laspeyres index formula, which is based on weighted average prices. Only the most highly liquid categories of stock are considered, as well as those securities that are in free float (i.e., based on live supply and demand).
To calculate the dax index live, prices are taken from the Xetra stock exchange, which is managed by one of the largest stock exchange organizations, Deutsche Börse. Also you can see Uk 100 and US 100 index live.
Stock dividends are also included in the calculation, as it is assumed that all earnings are capitalized in the companies from whose securities they were paid.
One way to track the behavior of the index is to look at events in the economic calendar.
What Affects Its Quotes
The main driving force behind DAX quotes is fundamental data. If important news about the eurozone is released, it will certainly affect the price movement of the index.
On one of the sides of the quotation can go if in a sector to which belongs a piece of companies from the DAX index, an important event (the publication of reports, the release of a new line of products, and so on).
The world situation often becomes the cause of growth or collapse of the DAX. Rise or fall, for example, indexes on the U.S. stock exchanges will automatically pull European indices.
Ways to invest in the DAX
To make money on the German stock index, investors can choose one of the options described below. They all differ in the way of entering the market, the threshold amount of finances needed to begin with, and the level of difficulty of investing.
Buying shares from the DAX via a broker
After registering with the chosen intermediary and opening an account, you need to collect the shares of the thirty companies included in the German stock index into your portfolio.
Investing in DAX Index ETFs
The funds create portfolios of stocks and offer investors to buy. It takes effort to find a portfolio that is completely identical to the DAX, but it will be worth the effort — you can get a set of highly liquid stocks assembled by professional managers. The price will be much lower than collecting the shares yourself.
Futures on the DAX
To implement this, you need to find an overseas broker that works with an exchange that provides such contracts.
The most effective way to use DAX quotes is to track DAX index news, and purchase the most promising stocks.