CAC 40 Index: What it is, Components, Quotation, How to invest today

The CAC 40 Index is the index that represents the 40 French and foreign stocks with the largest global capitalization, listed on Euronext Paris. 

Index composition: Which companies are included

The index interprets and represents a specific measure, based on the capitalization of the 40 most relevant and significant values among the 100 largest companies on the Paris Stock Exchange.

On December 31, 1987, the initial value of 1,000 points was fixed and, on December 1, 2003, the index was transformed taking the label of free float weighted, that is, the type of index for which the quantity of shares issued by a certain company, can freely be traded by investors even in the secondary market.

Its portfolio includes, among others, big names on the international scene, coming from the banking sector (Société Générale, BNP Paribas, Crédit Agricole), the fashion sector (EssilorLuxottica, LVMH, Kering), the French industry (Renault, Peugeot, Total), and other big European players (Danone, AXA, Carrefour, Airbus, Schneider Electric).

By carefully analyzing the companies, it is possible to notice right away that the CAC 40 is mainly made up of a “French” composition structure, but in reality another particular fact emerges, namely that about 45% of the total shares are owned by foreign investors. Many stocks have in fact been purchased, especially in the last twenty years, by companies from all over the world, and this has been made possible mainly thanks to a series of repeated privatizations at the expense of some French state companies.

Quotation and Historical Trend

Speaking of a free float index, the liquidity of the securities is measured through the use of two main indicators: thickness and breadth. Thickness means the average percentage spread applied, i.e. the difference between the “high values”, relative to the sale and purchase prices. Amplitude, on the other hand, is the directly proportional variable that arises by relating the free float and the daily value that the index measures (turnover), taking into account the daily rotation in general reference to each security. 

If we take as a reference analysis the trend of the CAC 40, always through the use of the bar chart (fundamental to be able to monitor and evaluate correctly any market movement), we will have a truly impressive result. Starting from the beginning of 2018, for example, throughout the year its quotation has never exceeded 5,600 points, starting from 4,825 points until closing in December with 4,678 points. And despite the relatively uncertain and somewhat fluctuating performance of the markets in this last period, the CAC 40 even marked in the last calendar year alone (January 2021-January 2022) an increase of almost 30%, starting from a base of 5,339 points and managing in a short time to even reach a peak of 7,116 points.

How to Buy CAC 40 Shares

All shares that are part of the CAC 40, are chosen regardless of the country in which the company is registered and operates, without any constraint of territoriality, provided, however, that the securities are traded on the Paris market. To invest in the CAC 40 today, there are several options.

One can turn to a bank, through which one can operate autonomously by opening a specific account for trading and deciding whether to invest by going directly to the branch or through the bank’s online site. This solution is perhaps the most historical and traditional, but includes management fees and commission costs a bit ‘more “salty”, despite the competition.

Or we could decide to turn to the so-called SIMs, those securities brokerage firms which over time have literally replaced the old stockbrokers, but which offer a limited number of services in the trading of shares.

Finally, there are the new financial brokers, which we could define as exactly the technological innovation of today applied to the world of stock markets. These are online platforms, reachable from mobile devices, that take advantage of the internet connection to accompany, assist and interact in a “user friendly” way with the user, managing to convey an absolutely unique and interactive experience.

The technology they make available, in fact, boasts more and more advanced economic tools, constantly updated and enjoying some technologies specifically designed for buying and selling operations on the markets. Surfing online today it is possible to find numerous investment solutions through brokers.

One of the most important platforms of the moment is eToro. Thanks to its large community that now boasts thousands of users constantly updated and informed on market trends, and all its economic tools available for free, we can define eToro as one of the most important players in the market.  

The commission costs are zero, there are no tickets or additional management fees, but above all provides the opportunity for its users to take advantage of a free Demo Account, which is a “test” platform in every way identical to the original, but where you learn to invest virtual money, so you have the opportunity to practice before investing real capital.

Forecasts for the Future

Investing in an index that is so varied, solid and carefully controlled, with a growth trend that continues to mark important numbers, thanks certainly also to the presence of companies in the luxury sector, could be a good option. As always, there is the rule that, like any other type of investment, no operation will ever guarantee a 100% secure gain, as the oscillations and fluctuations of the market undergo continuous variations based on a large number of factors, which very often are also of an extra-financial nature. The CAC 40, however, would seem to have excellent potential, and certainly an extra gear in the great scenario of international markets.

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