Designed to provide broad exposure to the Consumer Discretionary - Broad segment of the equity market, the First Trust Consumer Discretionary AlphaDEX ETF (
FXD Quick Quote FXD - Free Report) is a passively managed exchange traded fund launched on 05/08/2007.
Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also 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 12, placing it in bottom 25%.
The fund is sponsored by First Trust Advisors. It has amassed assets over $1.45 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.
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are 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 0.39%.
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 74.20% of the portfolio. Telecom and Industrials round out the top three.
Looking at individual holdings, Carvana Co. (
CVNA Quick Quote CVNA - Free Report) accounts for about 1.68% of total assets, followed by Discovery, Inc. (class A) ( DISCA Quick Quote DISCA - Free Report) and General Motors Company ( GM Quick Quote GM - Free Report) .
The top 10 holdings account for about 15.90% of total assets under management.
Performance and Risk
The ETF has added about 9.47% so far this year and was up about 22.50% in the last one year (as of 01/27/2021). In that past 52-week period, it has traded between $23.18 and $54.69.
The ETF has a beta of 1.44 and standard deviation of 29.71% for the trailing three-year period, making it a medium risk choice in the space. With about 116 holdings, it effectively diversifies company-specific risk.
First Trust Consumer Discretionary AlphaDEX ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, FXD is a great option for investors seeking exposure to the Consumer Discretionary ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.
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 $5.09 billion in assets, Consumer Discretionary Select Sector SPDR ETF has $19.29 billion. VCR has an expense ratio of 0.10% and XLY charges 0.13%. Bottom Line
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