Equities

The term "blue chips" refers to the most important listings of a share in terms of its market value. These shares have always attracted the greatest attention. The most important indices worldwide, such as the DAX, the DJ Eurostoxx 50 and the Dow Jones, all belong to the genre of blue chip indices, since they combine the largest market capitalisation of all the shares of the particular country or region. The index publishers establish fixed sets of rules, in which the requirements applicable to the index participants are determined. Inclusion in a blue chip index is therefore subject to transparent criteria.

Due to the weighting by market capitalisation, blue chip indices pick up on long-term economic trends. At the end of the 20th century, a large number of technology companies were included in the global blue chip indices, displacing old industrial companies from the indices. Rising raw material prices tend to result in increasing market values of companies extracting raw materials and to higher weightings in the relevant indices.

These mechanisms cause the weightings of individual sectors within a blue chip index to change continually. An investment in such an index is therefore not a static investment in a pre-defined basket, but is permanently adapting to the changes in the market.

Blue chip indices are often part of a larger index family and form a subset within a larger population, which is usually represented in a corresponding all-share index. The DAX, for instance, comprises the 30 highest values from the CDax, which comprises several hundred shares of companies listed in Germany. Below the level of the blue chip index, a corresponding mid cap index has become established in many cases, which represents the values at the next lower level - in Germany this would be the MDax.

Xtrackers provides opportunities to invest in a range of blue chip indices. They cover numerous markets and regions, thereby allowing the investor to acquire the most important indices of the global stock markets in one ETF.

ETFs for sector indices are common methods to enable investment with so-called “sector rotation”. In this model, it is assumed that different sectors or industries develop differently depending upon economic cycle. By means of the respective overweighting or underweighting of individual industries, an investor can attempt to obtain a performance that is better than the underlying overall index.

Each index offerer has developed its own system to divide the overall market into individual sectors. In some cases, granularity clearly differs. What is to be considered is the diversification effect of the included equities, which is usually clearly smaller within one sector, but is desired for sector rotation.

Sectors are calculated for most large, globally relevant equity indices, in such a way that investments are possible in both global and regional sectors.

Xtrackers sector index ETFs are an efficient and cost-effective option for participating in the performance of individual industries.

Due to the multitude of indices available world-wide, nearly all relevant markets can be presented cost-effectively and efficiently by ETFs. Index vendors recognised the formation of regional economic areas that go beyond individual country borders at an early stage, and have floated suitable indices. By means of ETFs for such regional indices, the investor can, for example, conveniently invest in countries of an economic area, without having to invest in the individual countries.

The background could be, for example, the elimination of foreign exchange risks for an investment in European equities. With DJ Euro Stoxx® 50, an investor calculating in euros receives a tried and tested vehicle to invest in the largest securities of the Eurozone. Compared to an investment in only one country of the Eurozone, this can lead to increased diversification and thereby a reduction in portfolio risk.

Within the framework of a core satellite investment, regional funds can take the role of both the core and the satellite, depending on the correlation effects of the underlying index to other investments. They open the possibility for private investors to invest in the broadly diversified securities markets of large economic areas. The selection of the countries and their weighting are subject to the rules of the index vendor.

Xtrackers offer a multitude of regional funds, which allow a global coverage in total. The products can be filtered according to region, by selecting the corresponding region in the ETFs search area.