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Is First Trust Dow Jones Global Select Dividend ETF (FGD) a Strong ETF Right Now?

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A smart beta exchange traded fund, the First Trust Dow Jones Global Select Dividend ETF (FGD - Free Report) debuted on 11/21/2007, and offers broad exposure to the Broad Developed World 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.

Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.

However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: 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.

The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.

Fund Sponsor & Index

The fund is managed by First Trust Advisors. FGD has been able to amass assets over $401.44 million, making it one of the average sized ETFs in the Broad Developed World ETFs. Before fees and expenses, this particular fund seeks to match the performance of the Dow Jones Global Select Dividend Index.

This Index is an indicated annual dividend yield weighted index of 100 stocks selected from the developed-market portion of the Dow Jones World Index.

Cost & Other Expenses

For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.

Annual operating expenses for this ETF are 0.59%, making it one of the more expensive products in the space.

FGD's 12-month trailing dividend yield is 5.96%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

When you look at individual holdings, Bankia, S.a. (BKIA.SM) accounts for about 2.92% of the fund's total assets, followed by Invesco Ltd. (IVZ - Free Report) and Hyundai Motor Company (preference) (005385.KS).

FGD's top 10 holdings account for about 17.19% of its total assets under management.

Performance and Risk

The ETF has added roughly 3.67% and is down about -0.98% so far this year and in the past one year (as of 02/03/2021), respectively. FGD has traded between $13.90 and $25.20 during this last 52-week period.

The fund has a beta of 1.05 and standard deviation of 25.11% for the trailing three-year period, which makes FGD a low risk choice in this particular space. With about 95 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust Dow Jones Global Select Dividend ETF is a reasonable option for investors seeking to outperform the Broad Developed World ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

IShares MSCI ACWI ETF (ACWI - Free Report) tracks MSCI All Country World Index and the Vanguard Total World Stock ETF (VT - Free Report) tracks FTSE Global All Cap Index. IShares MSCI ACWI ETF has $14.74 billion in assets, Vanguard Total World Stock ETF has $17.40 billion. ACWI has an expense ratio of 0.32% and VT charges 0.08%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Broad Developed World 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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