ETF: This is how the FTSE Germany All Cap works

When people talk about German stocks, many immediately think of the large black board in the trading floor. Like a symbol, the leading German index Dax is forcing the 40 most important local stocks into a curve. It is easy to forget that there used to be a good dozen German indices. Commerzbank, Dresdner and Deutsche Bank calculated their own stock market barometers – and that did well into the 1990s Southgerman newspaper.

But now an index provider is preparing to compete with the leading index Dax in the here and now. There is now the FTSE Germany All Cap index, which aims to wipe out one of the leading German indexes. Because the Dax is often criticized by experts: The index is too small, too low-yielding and overloaded with outdated industries. Are investors better off with the index attacker?

The FTSE Germany All Cap comprises almost 170 titles from Waterkant to Alpenrand. From A like Allianz to Z like Zooplus, big titles are represented there as well as medium and small stock market players. Unlike the Dax, which only contains the absolute stock market heavyweights, the FTSE Germany comprises a much broader stock market segment. With titles such as the kitchen manufacturer Rational or the battery company Varta, many secret global corporations are included, which are of particular interest to many investors in Germany.

But if you look closely, you will quickly see that the FTSE Germany, with its 167 shares, is only broadly positioned at first glance. Almost half of the index weight is attributable to the most important stocks. “The ten largest stocks dominate the index,” says Markus Thomas from the ETF rating agency Xenix. The smallest 120 stocks in the index, in turn, only make up around 20 percent. Investors with this index are not really broadly positioned, but at least a little broader than with the German leading index Dax and its just 40 stocks.

However, if you want to follow FTSE Germany with your money, you should be careful. If investors rely too heavily on Germany, they make their own equity investments dependent on the German economy in addition to their job. “A love of home is not a good advisor when investing,” says finance professor Hartmut Walz from the Ludwigshafen University of Applied Sciences. Investors distribute their risk better if they use a global index or several regional stock market indices to spread their money across countries and continents. Anyone who wants to show Germany a little more prominently in the depot with such a mix can think about investing five percent of their money in the FTSE Germany, for example. A suitable ETF is available from Vanguard (ISIN IE00BG143G97).

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