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Is First Trust Consumer Discretionary AlphaDEX ETF (FXD) a Strong ETF Right Now?
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A smart beta exchange traded fund, the First Trust Consumer Discretionary AlphaDEX ETF (FXD - Free Report) debuted on 05/08/2007, and offers broad exposure to the Consumer Discretionary ETFs 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.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
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.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
The fund is managed by First Trust Advisors. FXD has been able to amass assets over $2 billion, making it one of the largest ETFs in the Consumer Discretionary ETFs. FXD seeks to match the performance of the StrataQuant Consumer Discretionary Index before fees and expenses.
The StrataQuant Consumer Discretionary Index employs the AlphaDEX stock selection methodology to select stocks from the Russell 1000 Index.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Annual operating expenses for FXD are 0.63%, which makes it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 0.24%.
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 in the Consumer Discretionary sector - about 78.50% of the portfolio. Telecom and Industrials round out the top three.
When you look at individual holdings, Graham Holdings Company (GHC - Free Report) accounts for about 1.75% of the fund's total assets, followed by Qurate Retail, Inc. (class A) (QRTEA - Free Report) and Fox Corporation (class A) (FOXA - Free Report) .
The top 10 holdings account for about 15.98% of total assets under management.
Performance and Risk
The ETF has added about 24.75% and is up roughly 47.37% so far this year and in the past one year (as of 08/16/2021), respectively. FXD has traded between $41.38 and $62.89 during this last 52-week period.
The ETF has a beta of 1.44 and standard deviation of 29.99% for the trailing three-year period, making it a medium risk choice in the space. With about 114 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Consumer Discretionary AlphaDEX ETF is a reasonable option for investors seeking to outperform the Consumer Discretionary ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Consumer Discretionary ETF (VCR - Free Report) tracks MSCI US Investable Market Consumer Discretionary 25/50 Index and the Consumer Discretionary Select Sector SPDR ETF (XLY - Free Report) tracks Consumer Discretionary Select Sector Index. Vanguard Consumer Discretionary ETF has $6.30 billion in assets, Consumer Discretionary Select Sector SPDR ETF has $19.65 billion. VCR has an expense ratio of 0.10% and XLY charges 0.12%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Consumer Discretionary ETFs.
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 Consumer Discretionary AlphaDEX ETF (FXD) a Strong ETF Right Now?
A smart beta exchange traded fund, the First Trust Consumer Discretionary AlphaDEX ETF (FXD - Free Report) debuted on 05/08/2007, and offers broad exposure to the Consumer Discretionary ETFs 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.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
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.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
The fund is managed by First Trust Advisors. FXD has been able to amass assets over $2 billion, making it one of the largest ETFs in the Consumer Discretionary ETFs. FXD seeks to match the performance of the StrataQuant Consumer Discretionary Index before fees and expenses.
The StrataQuant Consumer Discretionary Index employs the AlphaDEX stock selection methodology to select stocks from the Russell 1000 Index.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Annual operating expenses for FXD are 0.63%, which makes it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 0.24%.
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 in the Consumer Discretionary sector - about 78.50% of the portfolio. Telecom and Industrials round out the top three.
When you look at individual holdings, Graham Holdings Company (GHC - Free Report) accounts for about 1.75% of the fund's total assets, followed by Qurate Retail, Inc. (class A) (QRTEA - Free Report) and Fox Corporation (class A) (FOXA - Free Report) .
The top 10 holdings account for about 15.98% of total assets under management.
Performance and Risk
The ETF has added about 24.75% and is up roughly 47.37% so far this year and in the past one year (as of 08/16/2021), respectively. FXD has traded between $41.38 and $62.89 during this last 52-week period.
The ETF has a beta of 1.44 and standard deviation of 29.99% for the trailing three-year period, making it a medium risk choice in the space. With about 114 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Consumer Discretionary AlphaDEX ETF is a reasonable option for investors seeking to outperform the Consumer Discretionary ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Consumer Discretionary ETF (VCR - Free Report) tracks MSCI US Investable Market Consumer Discretionary 25/50 Index and the Consumer Discretionary Select Sector SPDR ETF (XLY - Free Report) tracks Consumer Discretionary Select Sector Index. Vanguard Consumer Discretionary ETF has $6.30 billion in assets, Consumer Discretionary Select Sector SPDR ETF has $19.65 billion. VCR has an expense ratio of 0.10% and XLY charges 0.12%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Consumer Discretionary ETFs.
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.