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Is First Trust Consumer Discretionary AlphaDEX ETF (FXD) a Strong ETF Right Now?
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Making its debut on 05/08/2007, smart beta exchange traded fund First Trust Consumer Discretionary AlphaDEX ETF (FXD - Free Report) provides investors broad exposure to the Consumer Discretionary ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
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, and has been able to amass over $1.53 billion, which makes it one of the largest ETFs in the Consumer Discretionary ETFs. This particular fund, before fees and expenses, seeks to match the performance of the StrataQuant Consumer Discretionary Index.
The StrataQuant Consumer Discretionary Index employs the AlphaDEX stock selection methodology to select stocks from the Russell 1000 Index.
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.
It's 12-month trailing dividend yield comes in at 0.67%.
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 77.30% of the portfolio, the fund has heaviest allocation to the Consumer Discretionary sector; Industrials and Telecom round out the top three.
Taking into account individual holdings, Macy's, Inc. (M - Free Report) accounts for about 2.08% of the fund's total assets, followed by Uber Technologies, Inc. (UBER - Free Report) and D.r. Horton, Inc. (DHI - Free Report) .
Its top 10 holdings account for approximately 16.49% of FXD's total assets under management.
Performance and Risk
So far this year, FXD has added roughly 4.58%, and was up about 17% in the last one year (as of 03/01/2024). During this past 52-week period, the fund has traded between $46.79 and $61.68.
FXD has a beta of 1.37 and standard deviation of 23.51% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 122 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Consumer Discretionary AlphaDEX ETF is a reasonable option for investors seeking to outperform the Consumer Discretionary ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Consumer Discretionary ETF (VCR - Free Report) tracks MSCI US Investable Market Consumer Discretionary 25/50 Index and the Consumer Discretionary Select Sector SPDR ETF (XLY - Free Report) tracks Consumer Discretionary Select Sector Index. Vanguard Consumer Discretionary ETF has $5.66 billion in assets, Consumer Discretionary Select Sector SPDR ETF has $20.70 billion. VCR has an expense ratio of 0.10% and XLY charges 0.09%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Consumer Discretionary 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 Consumer Discretionary AlphaDEX ETF (FXD) a Strong ETF Right Now?
Making its debut on 05/08/2007, smart beta exchange traded fund First Trust Consumer Discretionary AlphaDEX ETF (FXD - Free Report) provides investors broad exposure to the Consumer Discretionary ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
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, and has been able to amass over $1.53 billion, which makes it one of the largest ETFs in the Consumer Discretionary ETFs. This particular fund, before fees and expenses, seeks to match the performance of the StrataQuant Consumer Discretionary Index.
The StrataQuant Consumer Discretionary Index employs the AlphaDEX stock selection methodology to select stocks from the Russell 1000 Index.
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.
It's 12-month trailing dividend yield comes in at 0.67%.
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 77.30% of the portfolio, the fund has heaviest allocation to the Consumer Discretionary sector; Industrials and Telecom round out the top three.
Taking into account individual holdings, Macy's, Inc. (M - Free Report) accounts for about 2.08% of the fund's total assets, followed by Uber Technologies, Inc. (UBER - Free Report) and D.r. Horton, Inc. (DHI - Free Report) .
Its top 10 holdings account for approximately 16.49% of FXD's total assets under management.
Performance and Risk
So far this year, FXD has added roughly 4.58%, and was up about 17% in the last one year (as of 03/01/2024). During this past 52-week period, the fund has traded between $46.79 and $61.68.
FXD has a beta of 1.37 and standard deviation of 23.51% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 122 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Consumer Discretionary AlphaDEX ETF is a reasonable option for investors seeking to outperform the Consumer Discretionary ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Consumer Discretionary ETF (VCR - Free Report) tracks MSCI US Investable Market Consumer Discretionary 25/50 Index and the Consumer Discretionary Select Sector SPDR ETF (XLY - Free Report) tracks Consumer Discretionary Select Sector Index. Vanguard Consumer Discretionary ETF has $5.66 billion in assets, Consumer Discretionary Select Sector SPDR ETF has $20.70 billion. VCR has an expense ratio of 0.10% and XLY charges 0.09%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Consumer Discretionary 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.