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Is First Trust Small Cap Growth AlphaDEX ETF (FYC) a Strong ETF Right Now?
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The First Trust Small Cap Growth AlphaDEX ETF (FYC - Free Report) made its debut on 04/19/2011, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - Small Cap Growth 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.
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.
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 sponsored by First Trust Advisors. It has amassed assets over $259.99 million, making it one of the average sized ETFs in the Style Box - Small Cap Growth. This particular fund, before fees and expenses, seeks to match the performance of the Nasdaq AlphaDEX Small Cap Growth Index.
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
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 FYC are 0.71%, which makes it one of the more expensive products in the space.
It has a 12-month trailing dividend yield of 0.21%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
FYC's heaviest allocation is in the Industrials sector, which is about 18.10% of the portfolio. Its Healthcare and Information Technology round out the top three.
Taking into account individual holdings, Modine Manufacturing Company (MOD - Free Report) accounts for about 0.90% of the fund's total assets, followed by E.l.f. Beauty, Inc. (ELF - Free Report) and Samsara Inc. (class A) (IOT - Free Report) .
Its top 10 holdings account for approximately 8.04% of FYC's total assets under management.
Performance and Risk
Year-to-date, the First Trust Small Cap Growth AlphaDEX ETF has added roughly 11.04% so far, and is up about 4.02% over the last 12 months (as of 09/04/2023). FYC has traded between $53.15 and $63.88 in this past 52-week period.
The ETF has a beta of 1.19 and standard deviation of 25.62% for the trailing three-year period, making it a high risk choice in the space. With about 264 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Small Cap Growth AlphaDEX ETF is an excellent option for investors seeking to outperform the Style Box - Small Cap Growth segment of the market. There are other ETFs in the space which investors could consider as well.
IShares Russell 2000 Growth ETF (IWO - Free Report) tracks Russell 2000 Growth Index and the Vanguard Small-Cap Growth ETF (VBK - Free Report) tracks CRSP U.S. Small Cap Growth Index. IShares Russell 2000 Growth ETF has $9.92 billion in assets, Vanguard Small-Cap Growth ETF has $14.41 billion. IWO has an expense ratio of 0.24% 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?
The First Trust Small Cap Growth AlphaDEX ETF (FYC - Free Report) made its debut on 04/19/2011, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - Small Cap Growth 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.
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.
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 sponsored by First Trust Advisors. It has amassed assets over $259.99 million, making it one of the average sized ETFs in the Style Box - Small Cap Growth. This particular fund, before fees and expenses, seeks to match the performance of the Nasdaq AlphaDEX Small Cap Growth Index.
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
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 FYC are 0.71%, which makes it one of the more expensive products in the space.
It has a 12-month trailing dividend yield of 0.21%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
FYC's heaviest allocation is in the Industrials sector, which is about 18.10% of the portfolio. Its Healthcare and Information Technology round out the top three.
Taking into account individual holdings, Modine Manufacturing Company (MOD - Free Report) accounts for about 0.90% of the fund's total assets, followed by E.l.f. Beauty, Inc. (ELF - Free Report) and Samsara Inc. (class A) (IOT - Free Report) .
Its top 10 holdings account for approximately 8.04% of FYC's total assets under management.
Performance and Risk
Year-to-date, the First Trust Small Cap Growth AlphaDEX ETF has added roughly 11.04% so far, and is up about 4.02% over the last 12 months (as of 09/04/2023). FYC has traded between $53.15 and $63.88 in this past 52-week period.
The ETF has a beta of 1.19 and standard deviation of 25.62% for the trailing three-year period, making it a high risk choice in the space. With about 264 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Small Cap Growth AlphaDEX ETF is an excellent option for investors seeking to outperform the Style Box - Small Cap Growth segment of the market. There are other ETFs in the space which investors could consider as well.
IShares Russell 2000 Growth ETF (IWO - Free Report) tracks Russell 2000 Growth Index and the Vanguard Small-Cap Growth ETF (VBK - Free Report) tracks CRSP U.S. Small Cap Growth Index. IShares Russell 2000 Growth ETF has $9.92 billion in assets, Vanguard Small-Cap Growth ETF has $14.41 billion. IWO has an expense ratio of 0.24% 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.