If you're interested in broad exposure to the Consumer Discretionary - Broad segment of the equity market, look no further than the First Trust Consumer Discretionary AlphaDEX ETF (
FXD Quick Quote FXD - Free Report) , a passively managed exchange traded fund launched on 05/08/2007.
While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.
Sector ETFs also provide investors access to a broad group of companies in particular sectors that offer low risk and diversified exposure. Consumer Discretionary - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 8, placing it in top 50%.
The fund is sponsored by First Trust Advisors. It has amassed assets over $1.21 billion, making it one of the largest ETFs attempting to match the performance of the Consumer Discretionary - Broad segment of the equity market. FXD seeks to match the performance of the StrataQuant Consumer Discretionary Index before fees and expenses.
The StrataQuant Consumer Discretionary Index employs the AlphaDEX stock selection methodology to select stocks from the Russell 1000 Index.
When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.
Annual operating expenses for this ETF are 0.64%, making it one of the more expensive products in the space.
It has a 12-month trailing dividend yield of 0.62%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Consumer Discretionary sector--about 70.70% of the portfolio. Industrials and Telecom round out the top three.
Looking at individual holdings, The Trade Desk, Inc. (class A) (
TTD Quick Quote TTD - Free Report) accounts for about 2.13% of total assets, followed by Peloton Interactive, Inc. (class A) ( PTON Quick Quote PTON - Free Report) and Mohawk Industries, Inc. ( MHK Quick Quote MHK - Free Report) .
The top 10 holdings account for about 16.02% of total assets under management.
Performance and Risk
So far this year, FXD has gained about 3.08%, and is up roughly 5.28% in the last one year (as of 11/19/2020). During this past 52-week period, the fund has traded between $23.18 and $46.74.
The ETF has a beta of 1.44 and standard deviation of 29.63% for the trailing three-year period, making it a medium risk choice in the space. With about 117 holdings, it effectively diversifies company-specific risk.
First Trust Consumer Discretionary AlphaDEX ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, FXD is a reasonable option for those seeking exposure to the Consumer Discretionary ETFs area of the market. Investors might also want to consider some other ETF options in the space.
Vanguard Consumer Discretionary ETF (
VCR Quick Quote VCR - Free Report) tracks MSCI US Investable Market Consumer Discretionary 25/50 Index and the Consumer Discretionary Select Sector SPDR ETF ( XLY Quick Quote XLY - Free Report) tracks Consumer Discretionary Select Sector Index. Vanguard Consumer Discretionary ETF has $4.06 billion in assets, Consumer Discretionary Select Sector SPDR ETF has $16.63 billion. VCR has an expense ratio of 0.10% and XLY charges 0.13%. Bottom Line
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