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Too 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.
by lorenzfx 5y ago
Too 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.