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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) was launched on 05/08/2007, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - All Cap Growth category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
Because the fund has amassed over $211.20 million, this makes it one of the average sized ETFs in the Style Box - All Cap Growth. FAD is managed by First Trust Advisors. 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
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Operating expenses on an annual basis are 0.63% for this ETF, which makes it one of the more expensive products in the space.
It has a 12-month trailing dividend yield of 0.17%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Information Technology sector - about 33.30% of the portfolio. Healthcare and Consumer Discretionary round out the top three.
When you look at individual holdings, Moderna, Inc. (MRNA - Free Report) accounts for about 0.63% of the fund's total assets, followed by Applied Materials, Inc. (AMAT - Free Report) and Snap Inc. (class A) (SNAP - Free Report) .
Its top 10 holdings account for approximately 5.47% of FAD's total assets under management.
Performance and Risk
The ETF return is roughly 8.78% and is up about 82.14% so far this year and in the past one year (as of 04/07/2021), respectively. FAD has traded between $63.44 and $118.03 during this last 52-week period.
The ETF has a beta of 1.10 and standard deviation of 26.03% for the trailing three-year period, making it 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 $2.03 billion in assets, iShares Core S&P U.S. Growth ETF has $10.81 billion. FPX has an expense ratio of 0.70% 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) was launched on 05/08/2007, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - All Cap Growth category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
Because the fund has amassed over $211.20 million, this makes it one of the average sized ETFs in the Style Box - All Cap Growth. FAD is managed by First Trust Advisors. 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
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Operating expenses on an annual basis are 0.63% for this ETF, which makes it one of the more expensive products in the space.
It has a 12-month trailing dividend yield of 0.17%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Information Technology sector - about 33.30% of the portfolio. Healthcare and Consumer Discretionary round out the top three.
When you look at individual holdings, Moderna, Inc. (MRNA - Free Report) accounts for about 0.63% of the fund's total assets, followed by Applied Materials, Inc. (AMAT - Free Report) and Snap Inc. (class A) (SNAP - Free Report) .
Its top 10 holdings account for approximately 5.47% of FAD's total assets under management.
Performance and Risk
The ETF return is roughly 8.78% and is up about 82.14% so far this year and in the past one year (as of 04/07/2021), respectively. FAD has traded between $63.44 and $118.03 during this last 52-week period.
The ETF has a beta of 1.10 and standard deviation of 26.03% for the trailing three-year period, making it 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 $2.03 billion in assets, iShares Core S&P U.S. Growth ETF has $10.81 billion. FPX has an expense ratio of 0.70% 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.