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Is First Trust Technology AlphaDEX ETF (FXL) a Strong ETF Right Now?
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Launched on 05/08/2007, the First Trust Technology AlphaDEX ETF (FXL - Free Report) is a smart beta exchange traded fund offering broad exposure to the Technology 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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
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.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is managed by First Trust Advisors. FXL has been able to amass assets over $1.13 billion, making it one of the larger ETFs in the Technology ETFs. This particular fund seeks to match the performance of the StrataQuant Technology Index before fees and expenses.
The StrataQuant Technology Index is a modified equal-dollar weighted index designed by the AMEX to objectively identify and select stocks from the Russell 1000 Index that may generate positive alpha relative to traditional passive style indices through the use of the AlphaDEX screening methodology.
Cost & Other Expenses
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.61%.
It's 12-month trailing dividend yield comes in at 0.27%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
FXL's heaviest allocation is in the Information Technology sector, which is about 90.80% of the portfolio.
When you look at individual holdings, Advanced Micro Devices, Inc. (AMD - Free Report) accounts for about 2.76% of the fund's total assets, followed by Amdocs Limited (DOX - Free Report) and Hewlett Packard Enterprise Company (HPE - Free Report) .
FXL's top 10 holdings account for about 19.03% of its total assets under management.
Performance and Risk
The ETF has lost about -24.89% so far this year and is down about -12.69% in the last one year (as of 05/19/2022). In the past 52-week period, it has traded between $96.81 and $138.38.
FXL has a beta of 1.18 and standard deviation of 30.26% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 108 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Technology AlphaDEX ETF is an excellent option for investors seeking to outperform the Technology ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
Technology Select Sector SPDR ETF (XLK - Free Report) tracks Technology Select Sector Index and the Vanguard Information Technology ETF (VGT - Free Report) tracks MSCI US Investable Market Information Technology 25/50 Index. Technology Select Sector SPDR ETF has $39.30 billion in assets, Vanguard Information Technology ETF has $41.64 billion. XLK has an expense ratio of 0.10% and VGT charges 0.10%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Technology 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 Technology AlphaDEX ETF (FXL) a Strong ETF Right Now?
Launched on 05/08/2007, the First Trust Technology AlphaDEX ETF (FXL - Free Report) is a smart beta exchange traded fund offering broad exposure to the Technology 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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
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.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is managed by First Trust Advisors. FXL has been able to amass assets over $1.13 billion, making it one of the larger ETFs in the Technology ETFs. This particular fund seeks to match the performance of the StrataQuant Technology Index before fees and expenses.
The StrataQuant Technology Index is a modified equal-dollar weighted index designed by the AMEX to objectively identify and select stocks from the Russell 1000 Index that may generate positive alpha relative to traditional passive style indices through the use of the AlphaDEX screening methodology.
Cost & Other Expenses
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.61%.
It's 12-month trailing dividend yield comes in at 0.27%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
FXL's heaviest allocation is in the Information Technology sector, which is about 90.80% of the portfolio.
When you look at individual holdings, Advanced Micro Devices, Inc. (AMD - Free Report) accounts for about 2.76% of the fund's total assets, followed by Amdocs Limited (DOX - Free Report) and Hewlett Packard Enterprise Company (HPE - Free Report) .
FXL's top 10 holdings account for about 19.03% of its total assets under management.
Performance and Risk
The ETF has lost about -24.89% so far this year and is down about -12.69% in the last one year (as of 05/19/2022). In the past 52-week period, it has traded between $96.81 and $138.38.
FXL has a beta of 1.18 and standard deviation of 30.26% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 108 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Technology AlphaDEX ETF is an excellent option for investors seeking to outperform the Technology ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
Technology Select Sector SPDR ETF (XLK - Free Report) tracks Technology Select Sector Index and the Vanguard Information Technology ETF (VGT - Free Report) tracks MSCI US Investable Market Information Technology 25/50 Index. Technology Select Sector SPDR ETF has $39.30 billion in assets, Vanguard Information Technology ETF has $41.64 billion. XLK has an expense ratio of 0.10% and VGT charges 0.10%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Technology 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.