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DAX30 is just way to small. In September the number of companies will be increased to 40. But even then, when you compare it to popular US indices like to SP5
by allendoerfer 5y ago
DAX30 is just way to small.
In September the number of companies will be increased to 40. But even then, when you compare it to popular US indices like to SP500 or even NASDAQ100 you can already see by the number of companies, that it is still tiny. The market cap of DAX30 is roughly 1 trillion $, while the SP500 has about 35 trillion $ in it.
In my mind if you want to invest into Germany, you could buy HDAX, which also includes MDAX and TECDAX and at least consists of about 100 companies. Unfortunately it is not at all popular.
Germany just has very little publicly traded capital, partly because of the privatly owned Mittelstand, sometimes resulting big corporations like Freudenberg, Bosch and others still being owned by a family or a foundation. Both of them would easily be included in the DAX.
The other problem of course is totally missing out on the whole IT thing.
- durnygbur 5y agoBusinesses like Lidl+Kaufland, BMW and others are just innocent family businesses. Nothing to look at here, folks.
- tasogare 5y agoNone of them are remotely in a monopolistic position in their different businesses.
- durnygbur 5y agoSchwarz group, the 4th largest retailer on the planet Earth, received public funding for their expansion in eastern Europe. I'm receving Lidl/Kaufland weekly paper leaflets at my doorstep anywhere I live in Germany or Poland, to be ecologically guilt tripped by various marketing materials on visiting their venues. Innocent family business, I said.
- adventured 5y agoAnd yet the German auto market is a particularly rigid oligopoly regardless, dominated by their domestic auto giants. BMW, Daimler, VW all stuffed into one $4.3t economy. It'd be like if GM and Ford were ten times larger than they are in relation to the size of the US economy. Scaled up to the US economy in size, those three would be up around $3 trillion in sales (five to six times the size of Walmart). So they're co-monopolies, towering over the German economy, sharing it all with one or two other giant German companies. I suppose that's nice of them, sharing is caring.
- allendoerfer 5y agoThe car companies are publicly traded. OP was talking about giant family owned corporations. You should watch out for Schwarz especially. Walmart tried to enter the German market and failed. Lidl/Aldi are expanding everywhere. I would say they are the only example where the German efficiency stereotype is actually true.
- merb 5y ago> The car companies are publicly traded well kinda. bmw basically is owned to 46% by two people and they control it. vw the same, most voting stock is in the hands Porsche Automobil Holding SE, basically owned by wolfang porsche, his ancestor was ferdinand porsche. yeah on paper they are traded. but not controlled. (mercedes is different here) but a lot corporations in germany are at least still controlled by descendants
- arez 5y agosince when do you need a "monopolistic position" to be a good investment?
- lorenzfx 5y agoToo small for what purpose? Also, the US' GNP is about 5 time that of Germany. If the NASDAQ100 is "big enough", the DAX should be big enough as well.
- allendoerfer 5y agoIt is too small to come up with a reason to buy a DAX ETF for most people. To stick to the GNP you mentioned: Let's say you want to own the whole world economy or you are European/German and want to own part of your own local economy. You buy something like an MSCI World (66% US) and now want to increase the miniscule percentage Germany has in them (<3%) to account for the GNP being 5 times smaller, not 22 times like the market cap suggest. Do you now want to do that by buying only 30 companies on top of the ~1600 companies inside the MSCI World? That would be extremly heavy bets on those companies. So something like a Europe STOXX 600 is much more useful for that purpose. DAX30 is an extremly narrow set of companies, which do not have much in comman, except that they are based in Germany. Even if you wanted to bet only on their "Germanness" for whatever strange reason, why would you buy only 30 companies? NASDAQ100 is not "big enough". You do not buy it because of its size, you buy it, because you want to bet on tech. It just happens to still be 15 times bigger than DAX30.
- oezi 5y agoExcept that DAX and EuroStoxx 600 are so correlated that it doesn't quite matter. People buy local indices because the are easier to grasp and reported on in the news daily. Other national indices rarely are. Diversification via stock ETFs is just 5 buckets: World, US, US Tech, emerging markets, Europe.
- allendoerfer 5y ago> Except that DAX and EuroStoxx 600 are so correlated that it doesn't quite matter. That is actually an argument for the bigger index, not the smaller.
- chalst 5y agoIt's not just the Mittelstand. It's also that Germany doesn't have financial markets as sophisticated as those in New York, London or Tokyo, so the DAX doesn't have companies whose centre of gravity is outside Germany in the same way. As an aside, "sophisticated" sounds like an applause word which is not intended: I think overall the benefits outweigh the harms for Germany to have its business decisions made more by industrialists than financiers.
- moistly 5y agoWhere you say “sophisticated”, I might say corrupt and likely criminal.
- chalst 5y agoNot all activities in the financial sector are destructive, but the sector as a whole has a tendency to reward destructive activity. You might like Michael Hudson's comment: "when left-wingers–or people who call themselves left-wingers, they’re really not left-wingers at all; they’re, I don’t know what, post-left–very few people who call themselves left-wingers distinguish between industrial capitalism and finance capitalism." https://twitter.com/txtpf/status/1393211215053299716 https://twitter.com/txtpf/status/1393211215053299716