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Is First Trust Technology AlphaDEX ETF (FXL) a Strong ETF Right Now?
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A smart beta exchange traded fund, the First Trust Technology AlphaDEX ETF (FXL - Free Report) debuted on 05/08/2007, and offers broad exposure to the Technology ETFs category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
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. FXL has been able to amass assets over $1.03 billion, making it one of the larger ETFs in the Technology ETFs. This particular fund, before fees and expenses, seeks to match the performance of the StrataQuant Technology Index.
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
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Annual operating expenses for this ETF are 0.61%, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.37%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
For FXL, it has heaviest allocation in the Information Technology sector --about 86.60% of the portfolio --while Industrials and Telecom round out the top three.
Taking into account individual holdings, On Semiconductor Corporation (ON - Free Report) accounts for about 2.03% of the fund's total assets, followed by Vertiv Holdings Co (class A) (VRT - Free Report) and Jabil Inc. (JBL - Free Report) .
FXL's top 10 holdings account for about 17.4% of its total assets under management.
Performance and Risk
So far this year, FXL has lost about -27.54%, and is down about -30.35% in the last one year (as of 11/21/2022). During this past 52-week period, the fund has traded between $84.85 and $134.45.
FXL has a beta of 1.17 and standard deviation of 31.95% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 104 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 $40.02 billion in assets, Vanguard Information Technology ETF has $41.10 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?
A smart beta exchange traded fund, the First Trust Technology AlphaDEX ETF (FXL - Free Report) debuted on 05/08/2007, and offers broad exposure to the Technology ETFs category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
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. FXL has been able to amass assets over $1.03 billion, making it one of the larger ETFs in the Technology ETFs. This particular fund, before fees and expenses, seeks to match the performance of the StrataQuant Technology Index.
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
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Annual operating expenses for this ETF are 0.61%, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.37%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
For FXL, it has heaviest allocation in the Information Technology sector --about 86.60% of the portfolio --while Industrials and Telecom round out the top three.
Taking into account individual holdings, On Semiconductor Corporation (ON - Free Report) accounts for about 2.03% of the fund's total assets, followed by Vertiv Holdings Co (class A) (VRT - Free Report) and Jabil Inc. (JBL - Free Report) .
FXL's top 10 holdings account for about 17.4% of its total assets under management.
Performance and Risk
So far this year, FXL has lost about -27.54%, and is down about -30.35% in the last one year (as of 11/21/2022). During this past 52-week period, the fund has traded between $84.85 and $134.45.
FXL has a beta of 1.17 and standard deviation of 31.95% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 104 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 $40.02 billion in assets, Vanguard Information Technology ETF has $41.10 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.