How to invest in DAX index funds in 2024

By:

Prash Raval

Prash is a financial writer for Invezz covering FX, the stock market and investing. For over a decade he has traded spot FX full time while... read more.

Updated: May 12, 2023

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It only takes a few minutes to invest in the DAX index. One of the simplest and most popular ways to invest is to buy shares in a Vanguard DAX ETF through an online trading platform.

Where can I invest in the DAX index?

According to our expert research, eToro is the best ETF broker to invest in DAX index funds. 

Both DAX ETFs and DAX CFDs are available to invest in through eToro .

Here are three more places to buy the DAX, ranked according to their cost, security, and features.

Most Popular

1

Min. Deposit

$ 10

Best offer

User Score

10

Up to $240 bonus!

Deposit with ACA, Wire, Pay with my bank

Invest for dividends and get payout on stocks on Ex-Dividend day

Start Trading more info

Payment Methods:

Bank Transfer, Credit Card, Debit Card, PayPal, Wire Transfer

Full Regulations:

CySEC, FCA

77% of retail CFD accounts lose money.

2

Min. Deposit

$ 100

Best offer

User Score

9.8

Trade +2000 CFDs on Shares, Options, Commodities & more

Unlimited risk-free Demo Account

0 commissions & attractive spreads with up to 1:5 leverage

Start Trading more info

Payment Methods:

American Express, Apple Pay, Bank Transfer, Credit Card, Debit Card, Discover, Google Pay, Mastercard, PayPal, SEPA, Trustly, Visa, , skrill

Full Regulations:

ASIC, FCA, FSA, MAS, cysec-250-14-regulator, isa-regulator

Buy or sell stock CFDs with Plus500. 82% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

3

Min. Deposit

-

Best offer

User Score

9.7

Diverse Stock Selection: Interactive Brokers offers a wide range of domestic and international stocks, providing investors with a diverse array of options for their portfolios.

Advanced Trading Tools: Investors benefit from real-time market data and advanced tools, empowering them to make informed decisions and execute trades with precision in the dynamic stock market.

Easy Portfolio Management: Interactive Brokers makes it simple to handle your investments by allowing you to easily switch between stocks and other assets on one platform, streamlining the way you manage your overall portfolio.

Start Trading more info

Payment Methods:

ACH, Bank Wire, Check

Full Regulations:

CFTC, FCA, FINRA, IIROC, NFA, NYSE, SIPC

How do I invest in the DAX 40 index?

The easiest way is to sign up to a stock broker, open an investment account, and buy shares in an DAX ETF or CFD. This guide explains how to do it:

Step 1. Sign up to eToro

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We recommend using eToro to invest in DAX. Sign up for a brokerage account and deposit some money. You may need to supply a form of photo ID to verify the account.

Most Popular

1

Min. Deposit

$ 10

Best offer

User Score

10

Up to $240 bonus!

Deposit with ACA, Wire, Pay with my bank

Invest for dividends and get payout on stocks on Ex-Dividend day

Start Trading more info

Payment Methods:

Bank Transfer, Credit Card, Debit Card, PayPal, Wire Transfer

Full Regulations:

CySEC, FCA

77% of retail CFD accounts lose money.

Step 2. Decide how to buy DAX

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This boils down to choosing between an DAX ETF or CFD. ETFs are generally better suited to investors who want to passively track the DAX’s performance. CFDs offer a greater range of trading options: you can use leverage, short the index, or buy and sell it outside of trading hours.

Step 3. Invest in the DAX

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Sign into your trading account and search for the DAX. Hit the ‘buy’ button and enter the details of your purchase, such as how much you want to spend. Hit ‘buy’ again to execute the trade.

Step 4. Monitor your investment

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When you buy a CFD, the trade goes through more or less instantly, and you’ll be able to see your new open position in your trading account. ETF purchases can take longer, and if you buy outside of traditional trading hours it won’t go through until the next morning.

Your trading account will show the price change in the DAX since you bought it, so you can see your profit/loss at a glance. Use that information, along with your own research, to decide when to sell the DAX and close your position, ideally at a profit!

 

The different ways to invest in the DAX 40

As we mentioned above, there are numerous ways to put your money into the DAX. ETFs and CFDs are the simplest options for beginners, but there are alternatives. Here’s a brief overview of each option and who it’s best suited for.

DAX ETFs

An ETF (exchange-traded fund) is an investment fund traded on a stock exchange, much like a stock. Exchange traded funds can hold different assets, such as individual stocks, bonds, or commodities, or serve as a proxy for a stock market index.

An DAX ETF is one way of investing in the DAX. It’s simply an investment fund that mirrors the performance of the DAX. When you buy shares in the fund, the value of your investment will rise or fall with the DAX itself. 

ETFs are ideal for new investors because they have a very low minimum investment. You can start with a few pounds and get exposure to some of the world’s largest companies. They’re also practical if you plan on trading the DAX index, because you can buy or sell shares in the fund throughout the day.

Examples of popular DAX 40 ETFs

• Xtrackers DAX UCITS ETF (XDAX)
• Amundi ETF DAX UCITS ETF DR (CG1)
• Lyxor DAX (DR) UCITS ETF (DAXX)

DAX index funds

An index or mutual fund is an investment fund that aims to track the performance of a stock market index, such as the DAX. It’s very similar to an ETF, in that there are low management fees and you can buy shares through your online broker.

However, there are a couple of differences. DAX index funds are only priced at the end of each trading day, so you can buy or sell shares in the fund once per day. There may also be a higher barrier to entry, through a much larger minimum investment when you invest in DAX index funds.

That means an DAX mutual fund is better suited for long term investors with a higher initial budget, where the infrequent trading and barriers to entry are far less of an issue.

DAX CFDs

CFDs (contracts for difference) are a way to speculate on DAX price changes with more flexibility than if you use an ETF or index fund. A CFD is a ‘derivative’, which means it gets its value from the underlying asset – in this case the DAX – but it’s separate from it.

As a result, CFDs can be leveraged, where you borrow money to multiply the size of the trade, or they can be used to go ‘short’, where you place a trade on the index to fall in value. You can also buy and sell them outside of regular trading hours.

All of this means DAX CFDs offer the potential to outperform a fund that passively tracks the DAX’s performance. Of course, you can also underperform it as well. Tools like leverage and shorting introduce a lot more risk, and are best left to experienced traders.

DAX futures

Futures contracts are agreements to buy or sell the DAX 40 at an agreed price on a set date in the future. DAX futures are a means to predict how you think the index is going to perform over a set time frame, such as the next three or six months.

Most futures contracts involve leverage, so you only put up a small part of the total trade value (the margin) when you buy one. That makes futures more risky, and they require a bit more financial expertise to understand as well.

Some traders use futures as a hedge against the performance of stocks they own. For instance, if you own stocks that are part of the DAX then you might want to short the DAX so that you still make some money if the price falls.

DAX stocks

Another way to invest in the DAX is to buy shares in the individual stocks that the index tracks. It isn’t practical to buy every share in the index, but you can invest directly into a few of the most heavily weighted stocks in the DAX in order to get broad exposure to its performance.

The most heavily weighted stocks in the DAX tend to be the largest companies by market capitalisation. If you invest directly in those largest stocks, you gain exposure to the index without taking on the risk of all the underlying companies.

One reason to do this is that these larger companies with the highest market cap dominate the index anyway, so that it can give you the impression of a diversified portfolio while actually being reliant on the performance of those particular stocks.

For the DAX index, the largest stocks you might choose to invest in are:

The flip side of investing directly like this is that you lose the diversification and stability that comes with buying into an entire index. It requires much more hands-on management to do your own stock picking, so it’s best suited to more experienced investors.

How much does it cost to invest in the DAX index?

From $0 to $5, depending on how you invest. For each option, you must consider the cost of buying the actual asset, whether that’s an ETF, index fund, CFD, or share, plus the fees associated with it.

*A fee comparison of 3 leading brokers for example purposes

ETFs and CFDs are generally the cheapest option overall, as they have low fees and a low minimum investment. Index funds and mutual funds have low fees but may have a high minimum investment. Buying individual stocks is the most expensive option in absolute terms, because the share price of a single large company is often more than $100.

All options are likely to include a trading fee, which you pay each time you make a transaction. Some trading platforms offer zero-fee trading, with others it may be a few dollars. 

Then ETFs and index funds each have their own expense ratio. Expense ratios refer to an annual management fee, charged as a percentage of your total investment. Expense ratios are usually no more than 0.05%, so if you invest $1,000, you would pay $5 per year in management fees.

Should I invest in the DAX index? 

Yes, DAX investing is a great choice if you’re looking for a safer investment with more price stability compared to picking individual stocks. It gives you an instantly diverse portfolio with exposure to a broad area of the stock market.

The flip side is that you have less control over which companies you invest in. An index committee decides how the index works, and you can’t pick and choose the underlying companies you like the most. The DAX is better suited to hands-off investors, compared to those who have the skills, experience, and desire to pick their own stocks.

What are the advantages of investing in the DAX index?

An index provides instant stock market diversification, where you spread your risk across a large number of underlying companies, rather than one or two. Here are some more reasons why you might want to invest in the DAX index:

• The DAX gives exposure to the best German companies. The DAX index is made up of the 30 largest companies in Germany. While headquartered in Germany, many of these companies operate globally and are some of the largest in the world. 
• The German economy is stable. Germany has one of the world’s most stable and well established economies. It is often referred to as a safe haven for investors when economic conditions are uncertain. The DAX index gives investors access to this market. 
• Historically strong performance. The DAX index has historically performed well, delivering strong returns over the long term. It has increased by over 100% in value in the past decade. 

What are the disadvantages of investing in the DAX index?

The main risk of investing in the DAX is that all the underlying companies are related in some way, so a broader economic downturn that affected the entire country would likely affect many stocks in the index at the same time. Here are some more risks of DAX investing.

• The DAX is not diverse. While some of Germany’s biggest companies comprise the DAX index, the types of industries they come from are concentrated mainly within the technology and manufacturing sectors. This makes the index less diverse than others and downturns in specific industries can result in poor performance. 
• There may be foreign exchange risk. The DAX is priced in Euros, which means for investors located outside of the Eurozone, investing in it may expose them to currency fluctuations. However, the best brokers for investing in the DAX generally let you invest in your own currency. 

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