Looking for broad exposure to the Consumer Discretionary - Broad segment of the equity market? You should consider the First Trust Consumer Discretionary AlphaDEX ETF (
FXD Quick Quote FXD - Free Report) , a passively managed exchange traded fund launched on 05/08/2007.
Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.
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 5, placing it in top 31%.
The fund is sponsored by First Trust Advisors. It has amassed assets over $1.30 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.
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Annual operating expenses for this ETF are 0.64%, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.43%.
Sector Exposure and Top Holdings
ETFs offer a 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.
This ETF has heaviest allocation in the Consumer Discretionary sector--about 72% of the portfolio. Telecom and Industrials 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 added roughly 0%, and was up about 11.04% in the last one year (as of 01/05/2021). During this past 52-week period, the fund has traded between $23.18 and $51.13.
The ETF has a beta of 1.44 and standard deviation of 29.68% 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 sufficient 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 $4.50 billion in assets, Consumer Discretionary Select Sector SPDR ETF has $18.22 billion. VCR has an expense ratio of 0.10% and XLY charges 0.13%. Bottom Line
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