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Is First Trust Consumer Discretionary AlphaDEX ETF (FXD) a Strong ETF Right Now?
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The First Trust Consumer Discretionary AlphaDEX ETF (FXD - Free Report) made its debut on 05/08/2007, and is a smart beta exchange traded fund that provides 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.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
Managed by First Trust Advisors, FXD has amassed assets over $1.70 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
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.
Operating expenses on an annual basis are 0.61% for this ETF, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.70%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
FXD's heaviest allocation is in the Consumer Discretionary sector, which is about 82% of the portfolio. Its Telecom and Industrials round out the top three.
Looking at individual holdings, Toll Brothers, Inc. (TOL - Free Report) accounts for about 1.44% of total assets, followed by General Motors Company (GM - Free Report) and Pultegroup, Inc. (PHM - Free Report) .
The top 10 holdings account for about 14.11% of total assets under management.
Performance and Risk
The ETF has lost about -10.62% and was up about 2.35% so far this year and in the past one year (as of 01/24/2022), respectively. FXD has traded between $52.49 and $65.57 during this last 52-week period.
FXD has a beta of 1.39 and standard deviation of 29.81% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 122 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 $6.51 billion in assets, Consumer Discretionary Select Sector SPDR ETF has $20.75 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?
The First Trust Consumer Discretionary AlphaDEX ETF (FXD - Free Report) made its debut on 05/08/2007, and is a smart beta exchange traded fund that provides 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.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
Managed by First Trust Advisors, FXD has amassed assets over $1.70 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
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.
Operating expenses on an annual basis are 0.61% for this ETF, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.70%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
FXD's heaviest allocation is in the Consumer Discretionary sector, which is about 82% of the portfolio. Its Telecom and Industrials round out the top three.
Looking at individual holdings, Toll Brothers, Inc. (TOL - Free Report) accounts for about 1.44% of total assets, followed by General Motors Company (GM - Free Report) and Pultegroup, Inc. (PHM - Free Report) .
The top 10 holdings account for about 14.11% of total assets under management.
Performance and Risk
The ETF has lost about -10.62% and was up about 2.35% so far this year and in the past one year (as of 01/24/2022), respectively. FXD has traded between $52.49 and $65.57 during this last 52-week period.
FXD has a beta of 1.39 and standard deviation of 29.81% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 122 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 $6.51 billion in assets, Consumer Discretionary Select Sector SPDR ETF has $20.75 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.