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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?
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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
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.
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 $1.16 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
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.
FXL's 12-month trailing dividend yield is 0.23%.
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.
Representing 85.70% of the portfolio, the fund has heaviest allocation to the Information Technology sector; Industrials and Telecom round out the top three.
When you look at individual holdings, Vertiv Holdings Co (class A) (VRT - Free Report) accounts for about 2.75% of the fund's total assets, followed by Jabil Inc. (JBL - Free Report) and Lam Research Corporation (LRCX - Free Report) .
The top 10 holdings account for about 19.23% of total assets under management.
Performance and Risk
The ETF has added about 22.26% and was up about 6.38% so far this year and in the past one year (as of 08/28/2023), respectively. FXL has traded between $84.85 and $121.01 during this last 52-week period.
The fund has a beta of 1.18 and standard deviation of 26.49% for the trailing three-year period, which makes FXL a medium risk choice in this particular space. With about 100 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 $48.79 billion in assets, Vanguard Information Technology ETF has $50.95 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?
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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
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.
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 $1.16 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
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.
FXL's 12-month trailing dividend yield is 0.23%.
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.
Representing 85.70% of the portfolio, the fund has heaviest allocation to the Information Technology sector; Industrials and Telecom round out the top three.
When you look at individual holdings, Vertiv Holdings Co (class A) (VRT - Free Report) accounts for about 2.75% of the fund's total assets, followed by Jabil Inc. (JBL - Free Report) and Lam Research Corporation (LRCX - Free Report) .
The top 10 holdings account for about 19.23% of total assets under management.
Performance and Risk
The ETF has added about 22.26% and was up about 6.38% so far this year and in the past one year (as of 08/28/2023), respectively. FXL has traded between $84.85 and $121.01 during this last 52-week period.
The fund has a beta of 1.18 and standard deviation of 26.49% for the trailing three-year period, which makes FXL a medium risk choice in this particular space. With about 100 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 $48.79 billion in assets, Vanguard Information Technology ETF has $50.95 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.