For German investors, there’s probably no better-known group of stocks than the DAX 30.
German investors know the DAX 30 because they are the biggest – and in many cases, the best – businesses that Germany has to offer. Consumers, meanwhile, know them for very similar reasons. Whether you’re thinking about a luxury car from BMW, lacing up a new pair of Adidas running shoes, or doing some online banking with Commerzbank, you can find many of the companies that you interact with on a day-to-day basis in the DAX 30.
When it comes to investing, the easiest path to good long-term results is to buy an index fund. An index fund is a stock fund that owns all of the stocks of a major index like the U.S.’s S&P 500, Japan’s Nikkei 225, or, yes, Germany’s DAX 30.
Index funds are great for investors for two primary reasons. First, you don’t have to worry about choosing which individual stocks you want to buy. So in the case of the DAX, rather than deciding between owning Deutsche Bank and K+S AG, you would simply own both, along with the 28 other stocks in the DAX 30.
The other advantage is that index funds tend to be low cost. Any time you buy a stock fund, you’ll end up paying fees. “Actively managed” funds have a fund manager that tries to pick and choose the best stocks – these also tend to have the highest fees. “Passively managed” funds like index funds don’t need to hire fancy highly-paid stock analysts, so they’re able to keep their fees much lower.
So how exactly do you buy the DAX 30?
There isn’t one, single DAX 30 index fund. Instead, the DAX 30 index is maintained by Deutsche Börse, and then fund management companies create their own versions of the DAX 30 index that you can invest in. Here are three of the largest that you can buy:
- iShares DAX UCITS ETF (WKN:593393)
- Deka DAX UCITS ETF (WKN:ETFL01)
- DB X-Trackers DAX UCITS ETF (WKN:DBX1DA)
Now, the three reasons why you might not want a DAX 30 index fund
I’ve already given you some compelling reasons why buying a DAX 30 index fund is a great idea. It’s easy, and it’s low cost. For many investors, buying a DAX index fund and owning it for a long time is the best option. Full stop.
So what’s not to like then? Here are three things you should keep in mind.
1. Investing in just the best companies
As I said, not having to pick the specific stocks you want is an advantage of a DAX index fund. But not getting to pick the stocks you want is a disadvantage of owning a DAX index fund.
Think about it this way: With a DAX index fund you own all of the DAX 30 stocks, which means you own the best of the bunch … but also the worst of the bunch. Over the past five years, you would have owned the soaring BMW, but you also would have owned the struggling Deutsche Bank.
If you are willing to spend some time analyzing businesses and figuring out which DAX companies are the best ones to own, you can end up with stock returns that are better than what you could get from the DAX index.
2. It’s good to think small
The DAX 30 constitutes just the 30 largest German businesses. However, there are a great many wonderful businesses in Germany that are not counted among the largest 30. If you buy only the DAX, you don’t own them.
3. There’s a big world outside of Germany
Finally, if you owned just a DAX index, you would be invested in just German stocks. While there are many great businesses in Germany – both in the DAX and outside the DAX – there are many other great businesses around the world that you can invest in. Over the long term, diversifying your portfolio geographically can boost your investing returns and reduce your risk.
To DAX or not to DAX?
If you’re a person that wants to get the great benefits that come from investing in stocks for the long term, but don’t want to do the work that comes along with buying individual stocks, then buying an index fund like the DAX 30 can be a great option. It’s even better if you pair your DAX index fund with other index funds to give you diversification into smaller companies and other countries.
If, on the other hand, you’re someone who’s interested in analyzing businesses, and is willing to spend some time and effort to do some investing work (I promise, it’s not painful!), then you may be better off skipping the index fund – or, at least, not just buying an index fund – and setting your sites on beating the market.
Bis zu 130 Mrd. US-Dollar investiert Investorenlegende Warren Buffett in nur ein einziges Unternehmen. Das zeugt von riesigem Vertrauen in das Zukunftspotential.
Buffett hat so einige Mega-Milliardeninvestments in seinem Portfolio. Wir haben sie näher analysiert, und angesehen, inwieweit sie sich zum Nachahmen eignen.