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Is First Trust Small Cap Growth AlphaDEX ETF (FYC) a Strong ETF Right Now?
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A smart beta exchange traded fund, the First Trust Small Cap Growth AlphaDEX ETF (FYC - Free Report) debuted on 04/19/2011, and offers broad exposure to the Style Box - Small Cap Growth category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option 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.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
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
FYC is managed by First Trust Advisors, and this fund has amassed over $206.15 million, which makes it one of the average sized ETFs in the Style Box - Small Cap Growth. This particular fund seeks to match the performance of the Nasdaq AlphaDEX Small Cap Growth Index before fees and expenses.
The NASDAQ AlphaDEX Small Cap Growth Index is an enhanced which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 700 Small Cap Growth 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 this ETF are 0.70%, making it one of the more expensive products in the space.
The fund has a 12-month trailing dividend yield of 0.77%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
Representing 18.40% of the portfolio, the fund has heaviest allocation to the Healthcare sector; Industrials and Information Technology round out the top three.
Taking into account individual holdings, Global Blood Therapeutics, Inc. accounts for about 0.90% of the fund's total assets, followed by Array Technologies, Inc. (ARRY - Free Report) and Celsius Holdings, Inc. (CELH - Free Report) .
FYC's top 10 holdings account for about 7.64% of its total assets under management.
Performance and Risk
Year-to-date, the First Trust Small Cap Growth AlphaDEX ETF has lost about -22.71% so far, and is down about -21.98% over the last 12 months (as of 10/27/2022). FYC has traded between $52.17 and $80.47 in this past 52-week period.
The fund has a beta of 1.18 and standard deviation of 32.92% for the trailing three-year period, which makes FYC a high risk choice in this particular space. With about 263 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Small Cap Growth AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - Small Cap Growth segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Russell 2000 Growth ETF (IWO - Free Report) tracks Russell 2000 Growth Index and the Vanguard SmallCap Growth ETF (VBK - Free Report) tracks CRSP U.S. Small Cap Growth Index. IShares Russell 2000 Growth ETF has $9.45 billion in assets, Vanguard SmallCap Growth ETF has $12 billion. IWO has an expense ratio of 0.23% and VBK charges 0.07%.
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 - Small 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 Small Cap Growth AlphaDEX ETF (FYC) a Strong ETF Right Now?
A smart beta exchange traded fund, the First Trust Small Cap Growth AlphaDEX ETF (FYC - Free Report) debuted on 04/19/2011, and offers broad exposure to the Style Box - Small Cap Growth category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option 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.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
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
FYC is managed by First Trust Advisors, and this fund has amassed over $206.15 million, which makes it one of the average sized ETFs in the Style Box - Small Cap Growth. This particular fund seeks to match the performance of the Nasdaq AlphaDEX Small Cap Growth Index before fees and expenses.
The NASDAQ AlphaDEX Small Cap Growth Index is an enhanced which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 700 Small Cap Growth 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 this ETF are 0.70%, making it one of the more expensive products in the space.
The fund has a 12-month trailing dividend yield of 0.77%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
Representing 18.40% of the portfolio, the fund has heaviest allocation to the Healthcare sector; Industrials and Information Technology round out the top three.
Taking into account individual holdings, Global Blood Therapeutics, Inc. accounts for about 0.90% of the fund's total assets, followed by Array Technologies, Inc. (ARRY - Free Report) and Celsius Holdings, Inc. (CELH - Free Report) .
FYC's top 10 holdings account for about 7.64% of its total assets under management.
Performance and Risk
Year-to-date, the First Trust Small Cap Growth AlphaDEX ETF has lost about -22.71% so far, and is down about -21.98% over the last 12 months (as of 10/27/2022). FYC has traded between $52.17 and $80.47 in this past 52-week period.
The fund has a beta of 1.18 and standard deviation of 32.92% for the trailing three-year period, which makes FYC a high risk choice in this particular space. With about 263 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Small Cap Growth AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - Small Cap Growth segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Russell 2000 Growth ETF (IWO - Free Report) tracks Russell 2000 Growth Index and the Vanguard SmallCap Growth ETF (VBK - Free Report) tracks CRSP U.S. Small Cap Growth Index. IShares Russell 2000 Growth ETF has $9.45 billion in assets, Vanguard SmallCap Growth ETF has $12 billion. IWO has an expense ratio of 0.23% and VBK charges 0.07%.
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 - Small 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.