What Is the DAX 40 Index? Learn How to Invest in the DAX 40 Index
As of 20 September 2021, Germany’s benchmark index, the DAX 30, admitted ten new stocks to its ranks and consequently became the DAX 40 Index.
In this article, we will tell you everything you need to know about the new DAX 40, including the new DAX index constituents.
Furthermore, we will demonstrate the different ways you can start trading the DAX 40 with Admirals and how to get one of the industry’s most competitive spreads when trading the index through an Admirals account.
It is also notable to mention, Admirals (Admiral Markets/The Admiral Markets Groups AS) is a licensed partner of the DAX® 40. We are an official license holder of Deutsche Börse AG, the license holder of the DAX®. This allows us to offer the DAX® 40 CFD to our clients registered with Admirals, which is unique for a global CFD registered broker.
* As of 24 September 2022, the Apple App store has removed both MT4 and MT5 from their app catalogue; please be aware that you can still access these tools via the Admirals mobile app and Admirals Web Trader.
Table of Contents
What is Dax? An Introduction
The DAX 30, or the Deutscher Aktienindex, has been Germany’s benchmark index since it was formed in 1988 and is one of Europe’s most popular stock indices amongst traders. Originally, the index was made up of the 30 largest German companies by market capitalization.
However, as of September 2021, the index’s number grew with the addition of ten more of the country’s largest companies and became the DAX 40 Index. This increase in size is expected to improve the quality of the index, whilst also providing a broader representation of Germany’s largest businesses and, therefore, the overall economy.
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DAX30 to DAX40 Index Changes
As well as growing in size, the index has also introduced stricter rules surrounding a company’s eligibility to be included. Going forward, as well as needing to satisfy market capitalization requirements, new members will be required to post two years of positive earnings before interest, taxes, depreciation and amortization (EBITDA) - this will not apply to companies already in the DAX index.
Moreover, the new DAX 40 Index will be reviewed twice a year, compared to the current annual review of the DAX 30, and constituents will be required to publish quarterly results as well as audited annual results.
DAX 40: Why Is It Changing?
The changes in the DAX Index are largely thought to be in response to the Wirecard scandal in 2019, in which Wirecard - at the time, a member of the DAX 30 – was exposed by whistleblowers for accounting irregularities and fraud.
The company subsequently collapsed and filed for insolvency after investigations found that around €1.9 billion was missing – a revelation that led to the termination and arrest of CEO Markus Braun.
This scandal negatively impacted investor confidence, not only in the DAX 30 but in the German financial markets in general. Partly in response to these events, the Deutsche Börse Group decided it was time to remodel the DAX Index and, thus, the DAX 40 Index is born.
DAX Index: Constituents
Below is a table showing the Dax Index constituents as of September 2021, with the ten new additions highlighted in green.
What Do the Changes Mean For Traders?
The addition of ten new companies to the DAX 40 Index means traders and investors will have an opportunity to gain greater broader exposure to the German financial markets and, as a result, the benchmark index will better reflect the wider German economy.
The increase in DAX index constituents also means that traders who hold positions in the index will benefit from greater diversification in their portfolio – a key part of an effective risk management strategy. This greater level of diversification reduces the ability of an individual company to influence the overall value of the index.
Moreover, the new companies have lower market capitalizations than the previous DAX index constituents, meaning that the index has greater potential for future growth than before.
DAX Index: How to Invest?
With an Invest.MT5 account from Admirals, investors can buy shares in all the DAX Index constituents, including the newest additions. The Invest.MT5 account also allows you to buy shares in Exchange-Traded Funds (ETFs) which track the DAX index.
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DAX ETFs
Exchange-Traded Funds (ETFs) are securities that are traded on stock exchanges and designed to track an index, sector or asset.
Therefore, a DAX ETF is designed to mirror the performance of the DAX 40 Index and does this by using investors’ funds to buy shares in all the DAX index constituents. This means that by purchasing shares in DAX ETFs, with a single investment, you are gaining exposure to the entire index.
If DAX ETFs sound like a good investment to you, you will be pleased to know that, with an Invest.MT5 account from Admirals, you can buy shares in the iShares Core DAX UCITS ETF!
Admirals MetaTrader 5 – iShares Core DAX UCITS ETF Monthly Chart. Date Range: August 2019 – October 2023. Date Captured: 10 October 2023
Trading the DAX 40 With CFDs
DAX ETFs are not the only way to gain exposure to the entire index with a single investment. With a Trade.MT5 account from Admirals, you can trade Contracts for Difference (CFDs) on the DAX 40, FTSE100, S&P500 and many other major stock indices from around the world!
CFDs allow traders to speculate on both rising and falling prices, whilst also benefiting from the use of leverage – which permits traders to command larger positions than their account balance would otherwise.
In order to start trading the DAX 40 using CFDs with Admirals, follow these steps:
- Open a Trade.MT5 account with Admirals
- Download the MetaTrader 5 trading platform
- Head to the Market Watch window on the left-hand side of the screen, locate the symbol for the DAX 40 Index [DAX40], right click and select ‘Chart Window’ in order to open a price chart. If the symbol is not already in Market Watch, you can search for it in the search bar at the bottom of the window
- At the top of the screen, select ‘New Order’ to bring up the order window shown below. Here, you can specify the size of your order, set a take profit and stop loss, and select whether you want to buy or sell
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Other articles you may find interesting:
- Trading CFDs on the DAX Index: A Beginner’s Guide
- What Are ETFs? ETFs, Explained
- A Beginners Guide to the Different Types of Stocks
Frequently Asked Questions
What is the DAX 40 index?
The DAX 40 is a stock market index that represents the performance of the 40 largest and most liquid publicly traded companies in Germany. It is one of the most widely followed equity indices in Europe and is often used as a benchmark for the German stock market.
How is the DAX 40 calculated?
The DAX 40 is a price-weighted index, meaning that the components are weighted based on their stock prices rather than market capitalization. The index is calculated using the total market value of the 40 companies' shares, with adjustments for stock splits and other corporate actions. The index is reviewed regularly to ensure it accurately reflects the German stock market.
What is the significance of the DAX 40 index?
The DAX 40 index serves as an important indicator of the health and performance of the German economy. It is used by investors, traders, and financial professionals to assess the overall performance of German equities and make investment decisions. Changes in the DAX 40 can also reflect broader economic trends and sentiment in Europe and globally.
INFORMATION ABOUT ANALYTICAL MATERIALS:
The given data provides additional information regarding all analysis, estimates, prognosis, forecasts, market reviews, weekly outlooks or other similar assessments or information (hereinafter “Analysis”) published on the websites of Admiral Markets investment firms operating under the Admiral Markets and Admirals trademarks (hereinafter “Admirals”). Before making any investment decisions please pay close attention to the following:
1. This is a marketing communication. The content is published for informative purposes only and is in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
2. Any investment decision is made by each client alone whereas Admirals shall not be responsible for any loss or damage arising from any such decision, whether or not based on the content.
3. With view to protecting the interests of our clients and the objectivity of the Analysis, Admirals has established relevant internal procedures for prevention and management of conflicts of interest.
4. The Analysis is prepared by an independent analyst (hereinafter “Author”) based on the NAME +(Position) personal estimations.
5. Whilst every reasonable effort is taken to ensure that all sources of the content are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admirals does not guarantee the accuracy or completeness of any information contained within the Analysis.
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7. Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, please ensure that you fully understand the risks involved.
