The Euro STOXX 50 Index is a market-weighted index of the 50 largest companies in the 11 Eurozone countries (Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain. The companies are selected from the 19 supersectors based on their market caps. The index is part of the STOXX Limited blue-chip index family and is widely used as a gauge of the European market because the 50 companies in the index make up approximately 60% of the free-float market cap of the EURO STOXX Total Market Index (TMI).
Investors who are looking to gain some safe international exposure in the Eurozone can look at the Euro STOXX 50 Index. Since 2011, the Euro STOXX 50 has grown more than 200% and it is trending higher.
The Euro STOXX 50 Index Is Market-Cap Weighted
The Euro STOXX 50 Index is a market capitalization index of the 50 largest blue chip companies in Europe.
The Euro STOXX 50 Index typically represents 60% of the broader Euro STOXX index that contains large-, mid-, and small-cap companies operating in the Eurozone.
The Euro STOXX 50 Index is one of the most liquid indices for the Eurozone. It serves as the underlying index for a variety of financial products such as exchange-traded funds and mutual funds.
As a market-cap-weighted index, the Euro STOXX 50 uses buffers to arrive at its portfolio holdings. The selection methodology hopes to ensure a stable and up-to-date index composition. There are also fast-exit rules to ensure the index accurately represents the performance of only the largest and most liquid companies in each sector.
The History of the Euro STOXX 50 Index
The Euro STOXX 50 Index is part of STOXX Limited, which is owned by Deutsche Borse AG. The Euro STOXX 50 Index was launched in 1998 and is one of the first indexes launched by STOXX Limited. Since launching the Euro STOXX 50, STOXX Limited has expanded its offerings to go beyond the European market and now maintains indexes for a large number of countries and regions.
What sectors are represented in the Euro STOXX Index?
The Euro STOXX Index includes the 19 supersectors in 11 Eurozone countries as measured by the free-float market cap.These are the top ten sectors and their associated weighting in the index in 2022.
- Consumer Cyclical - 16%
- Technology - 13.5%
- Financials - 13.2%
- Industrials - 12.7%
- Basic Materials 10.3%
How can investors invest in the Euro STOXX 50 Index?
Like the major exchanges in the United States, investors can’t invest directly in the Euro STOXX 50 Index. However, there are a number of passively managed index funds that track the Euro STOXX 50 Index and most of these funds are exchange-traded funds.
The most popular index fund pegged to the Euro STOXX 50 is the SPDR Euro STOXX 50 ETF (NYSEARCA: FEZ). This fund launched in 2002 and currently has about $1.5 billion in assets under management. Some other popular funds that use the Euro STOXX 50 as its underlying fund include:
The Euro STOXX Index Is Safe Exposure To Europe
Diversification is a key strategy for every investor. For index fund investors, diversification goes beyond investing in different sectors. It also means being exposed to different areas of the global economy. Although at any given time different regions may be outperforming or underperforming, one way to minimize risk while maximizing potential return is by choosing an index fund that selects the top-performing funds in that region. For the Eurozone, such an index is the Euro STOXX 50 Index. This is a market-cap-weighted index that provides exposure to the largest blue-chip stocks in Europe.
