As a result, they may be wondering whether it’s worth considering investing in other countries. For example, in the US via the Dow Jones (DJINDICES:DJI) or S&P 500 (SNPINDEX:GSPC), or in Germany via the DAX. Those two economies may not be about to endure a period of such great uncertainty as is the case for the UK. Therefore, domestically-focused companies could have superior near-term prospects compared to their British counterparts. And due to the US economy moving from strength to strength and the German economy continuing to benefit from a relatively weak euro, their prospects are rather bright.

Outperformance

Certainly, all three indices have outperformed the FTSE 100 (INDEXFTSE: UKX) in the last five years. While the UK’s index has risen by just 9%, the S&P 500 is up by 56%, the Dow Jones by 42% and the DAX by 31%. However, this could indicate that the FTSE 100 now offers better value for money than its three peers and that a buying opportunity exists in a post-Brexit  vote world as there are likely to be wider margins of safety on offer.

Clearly, the UK economic outlook is uncertain, but the reality is that the majority of FTSE 100 earnings are derived from outside of this country. This means it’s a truly international index and so its long-term performance may not differ all that much from the returns of its three peers. In an increasingly globalised world the four indices should in theory deliver similar levels of performance. Therefore, it could be argued that the bulk of the returns from the four indices should be broadly similar due to the major impact of global economic growth on their performance.

Diversified indexes

Of course, the Dow Jones is price-weighted, while the FTSE 100, S&P 500 and DAX are weighted by market capitalisation. This will give different performance in the same economic environment, while the DAX and Dow Jones have just 30 constituents apiece versus 100 and 500 for the FTSE 100 and S&P 500 as their names make clear. This means that the latter two are much more diversified and offer investors reduced company-specific risk. For many investors who are feeling somewhat nervous right now, this could prove to be a useful ally.

Meanwhile, the FTSE 100 has a far superior yield to its three international peers. It yields around 3.7% versus 2.5% for the DAX, 2.2% for the S&P 500 and 2.5% for the Dow Jones. At a time when interest rates in the UK are mooted for a fall in the coming months and the threat of inflation is lurking due to weaker sterling making imports more expensive, a higher yield could be a fillip for UK-based investors. A higher yield also indicates that the FTSE 100 offers better value for money.

So, while in recent years the FTSE 100 has underperformed versus the DAX, Dow Jones and S&P 500, as of the present time it seems to be the best option for long-term investors who are seeking to find the best stocks at the lowest prices.

The post Does Brexit mean the S&P 500, Dow Jones and DAX are better growth options than the FTSE 100? appeared first on The Twelfth Magpie.

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• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

They had no knowledge about investing in equities, or passion or time for learning about the subject, and asked my advice ahead of the meeting with the bank. I gave them the standard Motley Fool recommendation for people in their position: go for a low-cost index tracker.

Having imparted the advice, it occurred to me that I should probably actually have a look at the record of the DAX index — Germany’s equivalent of the FTSE 100. Well, I knew that Germany was the eurozone’s powerhouse, but I was thoroughly surprised to see by just how much the DAX had outperformed the Footsie. Crikey!, I thought, perhaps I should put a bit of money into a DAX tracker myself.

Then I made a discovery, which, despite being an experienced investor and commentator on the UK market and shares, came as a complete shock. I’ll tell you what that shocking discovery was shortly. But first, here’s why the subject has resurfaced.

I was struck by a distinct feeling of déjà vu when I read an article at the weekend by one of my Foolish colleagues: “Why Euro And US Rivals Are Set To Beat The FTSE 100“. The article noted that, while the FTSE 100 was up a measly 12% over the last 10 years, the US’s S&P 500 had risen by 55% and the DAX had soared by a whopping 125%.

However, I would urge investors to think carefully about ditching their FTSE 100 trackers or S&P 500 trackers in favour of a DAX tracker on the basis of the these figures.

Here’s why.

The shocking discovery I made when advising my in-laws (well, it was shocking to me and I’m sure it will be to many readers too!) is that the DAX is the only major stock market index that includes reinvested dividends. What the DAX’s whopping 125% gain — and massive outperformance of the FTSE 100 and S&P 500 — actually shows is the fantastic compounding power of dividend reinvestment.

The performance of the rarely-seen DAX Kursindex — the capital-only version of the DAX, and thus the true equivalent of the FTSE 100 and S&P 500 — is distinctly less impressive. It has lagged behind the S&P 500, although has still outperformed the Footsie, by a relatively modest degree.

In short, then, the grass is not always as green on the other side of the fence as it can sometimes appear. Switching out of your FTSE 100 or S&P 500 tracker into a DAX tracker may not deliver the stellar returns you might be anticipating.

The post Forget VW Emissions: The DAX Index Is Germany’s Biggest “Cheat”! appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

G A Chester has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.