The DAX is Germany’s headline equity index. It has one structural quirk that catches out almost
everyone who compares it with other national benchmarks. But first, the basics.
STOXX runs the index. It describes it as tracking “the performance of the 40 largest
companies listed on the Regulated Market of the Frankfurt Stock Exchange (FSE) that fulfil certain minimum
quality and profitability requirements”. STOXX picks constituents by free-float market
capitalisation. Also, the index carries the ISIN DE0008469008.
The quirk: the DAX includes dividends
This is the detail that matters most, yet few people mention it. In STOXX’s own words, the DAX “is one of the few
major country indices that also takes dividends into account in its most popular version, thus fully
reflecting the total return of an investment in the index portfolio”.
Almost every other headline country index you see quoted is a price index. That includes the FTSE 100, the
CAC 40 and the S&P 500 as normally reported. Such an index excludes dividends. By contrast, the DAX’s famous
version does not. For more detail, see our guide: CAC 40 Index.
As a result, comparing the DAX’s level against another country’s price index is not a like-for-like
comparison. Over long periods, the DAX will appear to outperform. That is simply because it counts something
the other index ignores. So if you want a fair comparison, you need one of two things. Either use the DAX price index
version, or use the other market’s total-return version. In fact, this single point explains a great deal of confused
commentary about German equity performance.
How the index is built
Forty companies, selected on rules rather than reputation. Constituents must meet published minimum
quality and profitability requirements, as well as size. STOXX also notes that index calculation and composition changes
“follow publicly available transparent rules”.
A 15% capping factor. STOXX states that diversification “is achieved by incorporating a
capping factor of 15% at component level, which ensures that no component can dominate the index”. In a
forty-stock index, that cap does real work. Without it, one or two very large companies could swamp the rest.
Broad market coverage despite the small count. STOXX says the DAX “generally covers over three
quarters of the aggregated market cap of companies listed on the Regulated Market of FSE”. So while forty names is
few, they make up most of the listed German market by value.
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What a European investor should weigh
Forty companies is concentrated. It is a single-country index of large caps in one economy. As a
satellite position expressing a view on German industry, that is coherent. As a core holding, however, it is not
diversification in any meaningful sense. Compare it with the
STOXX Europe 600, which covers 17 countries. Or
compare it with a global index such as the MSCI World.
Sector character matters more than in a broad index. A forty-stock index inherits the shape of the
national economy behind it. In Germany’s case, that means a heavy weighting toward industrials, carmakers, chemicals and
insurance. That is the point of buying it, but also the risk.
The euro is your currency exposure. For a eurozone investor, that removes a layer of currency risk
you would face in a US or UK index. For a non-euro investor, however, it adds one.
Check which version your fund tracks. Both a total-return and a price version exist. So confirm what
the fund’s benchmark actually is before you compare its performance with a quoted index level. Our guide to
tracking difference versus tracking
error covers why the fund’s realised return will differ from the index regardless.
For fund selection and current costs, use the
UCITS ETF comparison tool. Then check platform charges
in the EU broker fee dataset. Will the DAX sit
alongside a European or global fund? If so, first check the real duplication with the
overlap calculator. After all, a European index
already holds every DAX constituent.
The DAX is the top of a family, not the whole market
Forty companies cannot represent a whole economy, and Deutsche Börse does not pretend otherwise. Instead, the DAX
sits at the top of a tiered family. The MDAX covers mid-caps below it. Then further indices extend into smaller
companies and technology. So the DAX is the large-cap tier specifically.
That matters when you read German market commentary. “The DAX fell” describes forty large, mostly
export-oriented multinationals. It does not describe the German Mittelstand. Yet that is where much of the
country’s economic character actually sits. It is largely unlisted, or listed further down the tiers. So an
investor who wants German equity exposure, rather than German mega-cap exposure, needs to decide deliberately which tier
to buy.
The same logic applies to the sector shape. The index takes the forty largest qualifying companies. As a result, it
inherits whatever Germany’s largest listed businesses happen to do. A capping factor of 15% limits any single name.
However, it does nothing to stop an entire sector from dominating. If German industrials have a difficult decade,
a forty-stock German index has limited room to diversify away from that.
Frequently asked questions
How many companies are in the DAX?
Forty. They are the largest companies on the Regulated Market of the Frankfurt Stock Exchange that also meet minimum
quality and profitability requirements, selected on free-float market capitalisation.
Why does the DAX look like it outperforms other country indices?
Because its most popular version includes dividends, while most headline country indices are price indices that
exclude them. Comparing the two directly is not like-for-like — you need either the DAX price version or the other
index’s total-return version.
Can one company dominate the DAX?
Not beyond a point. A capping factor of 15% is applied at component level specifically to stop any single constituent
dominating a forty-stock index.
Is the DAX a good core holding?
Not on its own. It is forty large companies in a single economy and a single currency. It works as a deliberate
satellite tilt toward German industry, not as the foundation of a diversified portfolio.
Cited sources: STOXX — DAX index page, and Deutsche Börse — DAX. Verify current fund figures before investing. Educational content, not financial advice.
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European UCITS/ETF investor with 11+ years building a global dividend and index portfolio, and founder of Financial Expert Class. I write every guide here from first-hand experience investing across EU brokers and tax regimes — not theory. More about me →