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Is First Trust Multi Cap Growth AlphaDEX ETF (FAD) a Strong ETF Right Now?
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The First Trust Multi Cap Growth AlphaDEX ETF (FAD - Free Report) made its debut on 05/08/2007, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - All Cap Growth category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
The fund is managed by First Trust Advisors, and has been able to amass over $203.19 million, which makes it one of the average sized ETFs in the Style Box - All Cap Growth. FAD, before fees and expenses, seeks to match the performance of the Nasdaq AlphaDEX Multi Cap Growth Index.
The NASDAQ AlphaDEX Multi Cap Growth Index is an enhanced which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 500 Large Cap Index, NASDAQ US 600 Mid Cap Index and NASDAQ US 700 Small Cap Index.
Cost & Other Expenses
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Annual operating expenses for FAD are 0.66%, which makes it one of the more expensive products in the space.
FAD's 12-month trailing dividend yield is 0.32%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
FAD's heaviest allocation is in the Information Technology sector, which is about 30.90% of the portfolio. Its Healthcare and Consumer Discretionary round out the top three.
When you look at individual holdings, The Trade Desk, Inc. (class A) (TTD - Free Report) accounts for about 0.65% of the fund's total assets, followed by Pinterest, Inc (class A) (PINS - Free Report) and Snap Inc. (class A) (SNAP - Free Report) .
The top 10 holdings account for about 5.43% of total assets under management.
Performance and Risk
The ETF has added roughly 1.64% and was up about 34.26% so far this year and in the past one year (as of 01/06/2021), respectively. FAD has traded between $52.24 and $106.41 during this last 52-week period.
FAD has a beta of 1.13 and standard deviation of 25.53% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 675 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Multi Cap Growth AlphaDEX ETF is an excellent option for investors seeking to outperform the Style Box - All Cap Growth segment of the market. There are other ETFs in the space which investors could consider as well.
First Trust US Equity Opportunities ETF (FPX - Free Report) tracks IPOX-100 U.S. Index and the iShares Core S&P U.S. Growth ETF (IUSG - Free Report) tracks S&P 900 Growth Index. First Trust US Equity Opportunities ETF has $1.95 billion in assets, iShares Core S&P U.S. Growth ETF has $10.42 billion. FPX has an expense ratio of 0.58% and IUSG charges 0.04%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - All Cap Growth.
Bottom Line
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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Is First Trust Multi Cap Growth AlphaDEX ETF (FAD) a Strong ETF Right Now?
The First Trust Multi Cap Growth AlphaDEX ETF (FAD - Free Report) made its debut on 05/08/2007, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - All Cap Growth category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
The fund is managed by First Trust Advisors, and has been able to amass over $203.19 million, which makes it one of the average sized ETFs in the Style Box - All Cap Growth. FAD, before fees and expenses, seeks to match the performance of the Nasdaq AlphaDEX Multi Cap Growth Index.
The NASDAQ AlphaDEX Multi Cap Growth Index is an enhanced which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 500 Large Cap Index, NASDAQ US 600 Mid Cap Index and NASDAQ US 700 Small Cap Index.
Cost & Other Expenses
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Annual operating expenses for FAD are 0.66%, which makes it one of the more expensive products in the space.
FAD's 12-month trailing dividend yield is 0.32%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
FAD's heaviest allocation is in the Information Technology sector, which is about 30.90% of the portfolio. Its Healthcare and Consumer Discretionary round out the top three.
When you look at individual holdings, The Trade Desk, Inc. (class A) (TTD - Free Report) accounts for about 0.65% of the fund's total assets, followed by Pinterest, Inc (class A) (PINS - Free Report) and Snap Inc. (class A) (SNAP - Free Report) .
The top 10 holdings account for about 5.43% of total assets under management.
Performance and Risk
The ETF has added roughly 1.64% and was up about 34.26% so far this year and in the past one year (as of 01/06/2021), respectively. FAD has traded between $52.24 and $106.41 during this last 52-week period.
FAD has a beta of 1.13 and standard deviation of 25.53% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 675 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Multi Cap Growth AlphaDEX ETF is an excellent option for investors seeking to outperform the Style Box - All Cap Growth segment of the market. There are other ETFs in the space which investors could consider as well.
First Trust US Equity Opportunities ETF (FPX - Free Report) tracks IPOX-100 U.S. Index and the iShares Core S&P U.S. Growth ETF (IUSG - Free Report) tracks S&P 900 Growth Index. First Trust US Equity Opportunities ETF has $1.95 billion in assets, iShares Core S&P U.S. Growth ETF has $10.42 billion. FPX has an expense ratio of 0.58% and IUSG charges 0.04%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - All Cap Growth.
Bottom Line
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.