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Is First Trust Large Cap Value AlphaDEX ETF (FTA) a Strong ETF Right Now?
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A smart beta exchange traded fund, the First Trust Large Cap Value AlphaDEX ETF (FTA - Free Report) debuted on 05/08/2007, and offers broad exposure to the Style Box - Large Cap Value category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
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.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track 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.
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 $1.13 billion, which makes it one of the average sized ETFs in the Style Box - Large Cap Value. This particular fund, before fees and expenses, seeks to match the performance of the Nasdaq AlphaDEX Large Cap Value Index.
The NASDAQ AlphaDEX Large Cap Value Index is an enhanced index which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 500 Large Cap Value Index.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Operating expenses on an annual basis are 0.59% for FTA, making it one of the more expensive products in the space.
It's 12-month trailing dividend yield comes in at 1.84%.
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.
For FTA, it has heaviest allocation in the Financials sector --about 26.70% of the portfolio --while Utilities and Consumer Discretionary round out the top three.
When you look at individual holdings, At&t Inc. (T - Free Report) accounts for about 1.16% of the fund's total assets, followed by Lkq Corporation (LKQ - Free Report) and Exxon Mobil Corporation (XOM - Free Report) .
Its top 10 holdings account for approximately 10.03% of FTA's total assets under management.
Performance and Risk
So far this year, FTA has lost about -7.95%, and is down about -0.51% in the last one year (as of 09/15/2022). During this past 52-week period, the fund has traded between $61.01 and $72.65.
The ETF has a beta of 1.10 and standard deviation of 28.70% for the trailing three-year period, making it a medium risk choice in the space. With about 188 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Large Cap Value AlphaDEX ETF is an excellent option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. There are other ETFs in the space which investors could consider as well.
IShares Russell 1000 Value ETF (IWD - Free Report) tracks Russell 1000 Value Index and the Vanguard Value ETF (VTV - Free Report) tracks CRSP U.S. Large Cap Value Index. IShares Russell 1000 Value ETF has $51.77 billion in assets, Vanguard Value ETF has $97.35 billion. IWD has an expense ratio of 0.18% and VTV 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 - Large Cap Value.
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 Large Cap Value AlphaDEX ETF (FTA) a Strong ETF Right Now?
A smart beta exchange traded fund, the First Trust Large Cap Value AlphaDEX ETF (FTA - Free Report) debuted on 05/08/2007, and offers broad exposure to the Style Box - Large Cap Value category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
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.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track 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.
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 $1.13 billion, which makes it one of the average sized ETFs in the Style Box - Large Cap Value. This particular fund, before fees and expenses, seeks to match the performance of the Nasdaq AlphaDEX Large Cap Value Index.
The NASDAQ AlphaDEX Large Cap Value Index is an enhanced index which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 500 Large Cap Value Index.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Operating expenses on an annual basis are 0.59% for FTA, making it one of the more expensive products in the space.
It's 12-month trailing dividend yield comes in at 1.84%.
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.
For FTA, it has heaviest allocation in the Financials sector --about 26.70% of the portfolio --while Utilities and Consumer Discretionary round out the top three.
When you look at individual holdings, At&t Inc. (T - Free Report) accounts for about 1.16% of the fund's total assets, followed by Lkq Corporation (LKQ - Free Report) and Exxon Mobil Corporation (XOM - Free Report) .
Its top 10 holdings account for approximately 10.03% of FTA's total assets under management.
Performance and Risk
So far this year, FTA has lost about -7.95%, and is down about -0.51% in the last one year (as of 09/15/2022). During this past 52-week period, the fund has traded between $61.01 and $72.65.
The ETF has a beta of 1.10 and standard deviation of 28.70% for the trailing three-year period, making it a medium risk choice in the space. With about 188 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Large Cap Value AlphaDEX ETF is an excellent option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. There are other ETFs in the space which investors could consider as well.
IShares Russell 1000 Value ETF (IWD - Free Report) tracks Russell 1000 Value Index and the Vanguard Value ETF (VTV - Free Report) tracks CRSP U.S. Large Cap Value Index. IShares Russell 1000 Value ETF has $51.77 billion in assets, Vanguard Value ETF has $97.35 billion. IWD has an expense ratio of 0.18% and VTV 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 - Large Cap Value.
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.