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Should First Trust Mid Cap Growth AlphaDEX ETF (FNY) Be on Your Investing Radar?

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Looking for broad exposure to the Mid Cap Growth segment of the US equity market? You should consider the First Trust Mid Cap Growth AlphaDEX ETF (FNY - Free Report) , a passively managed exchange traded fund launched on 04/19/2011.

The fund is sponsored by First Trust Advisors. It has amassed assets over $324.42 million, making it one of the smaller ETFs attempting to match the Mid Cap Growth segment of the US equity market.

Why Mid Cap Growth

Compared to large and small cap companies, mid cap businesses tend to have higher growth prospects and are less volatile, respectively, with market capitalization between $2 billion and $10 billion. Thus, companies that fall under this category provide a stable and growth-heavy investment.

Qualities of growth stocks include faster growth rates compared to the broader market, as well as higher valuations and higher than average sales and earnings growth rates. Additionally, growth stocks have a greater level of risk associated with them. They are likely to outperform value stocks in strong bull markets but over the longer-term, value stocks have delivered better returns than growth stocks in almost all markets.

Costs

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for this ETF are 0.70%, making it the most expensive products in the space.

It has a 12-month trailing dividend yield of 0.27%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Healthcare sector--about 26.30% of the portfolio. Information Technology and Industrials round out the top three.

Looking at individual holdings, Quidel Corporation (QDEL - Free Report) accounts for about 1.25% of total assets, followed by Avalara, Inc. and Carvana Co. (CVNA - Free Report) .

The top 10 holdings account for about 9.79% of total assets under management.

Performance and Risk

FNY seeks to match the performance of the Nasdaq AlphaDEX Mid Cap Growth Index before fees and expenses. The NASDAQ AlphaDEX Mid Cap Growth Index is an enhanced which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 600 Mid Cap Growth Index.

The ETF has gained about 4.27% so far this year and it's up approximately 5.85% in the last one year (as of 07/29/2020). In the past 52-week period, it has traded between $31.56 and $51.66.

The ETF has a beta of 1.17 and standard deviation of 24.89% for the trailing three-year period, making it a medium risk choice in the space. With about 226 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust Mid Cap Growth AlphaDEX ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, FNY is an outstanding option for investors seeking exposure to the Style Box - Mid Cap Growth segment of the market. There are other additional ETFs in the space that investors could consider as well.

The Vanguard MidCap Growth ETF (VOT - Free Report) and the iShares Russell MidCap Growth ETF (IWP - Free Report) track a similar index. While Vanguard MidCap Growth ETF has $7.92 billion in assets, iShares Russell MidCap Growth ETF has $12.75 billion. VOT has an expense ratio of 0.07% and IWP charges 0.24%.

Bottom-Line

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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