If you're interested in broad exposure to the Mid Cap Growth segment of the US equity market, look no further than the First Trust Mid Cap Growth AlphaDEX ETF (
FNY Quick Quote FNY - Free Report) , a passively managed exchange traded fund launched on 04/19/2011.
The fund is sponsored by First Trust Advisors. It has amassed assets over $528.81 million, making it one of the average sized ETFs attempting to match the Mid Cap Growth segment of the US equity market.
Why Mid Cap Growth
With market capitalization between $2 billion and $10 billion, mid cap companies usually contain higher growth prospects than large cap companies, and are considered less risky than their small cap counterparts. These types of companies, then, have a good balance of stability and growth potential.
While growth stocks do boast higher than average sales and earnings growth rates, and they are expected to grow faster than the wider market, investors should note these kinds of stocks have higher valuations. Something to keep in mind is the higher level of volatility that is affiliated with growth stocks. Even though growth stocks are more likely to outperform their value counterparts in strong bull markets, value stocks have a record of delivering better returns in almost all markets than growth stocks.
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.
Annual operating expenses for this ETF are 0.70%, making it one of the most expensive products in the space.
It has a 12-month trailing dividend yield of 0.22%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation to the Information Technology sector--about 32.60% of the portfolio. Healthcare and Consumer Discretionary round out the top three.
Looking at individual holdings, Overstock.com, Inc. (
OSTK Quick Quote OSTK - Free Report) accounts for about 0.93% of total assets, followed by Fate Therapeutics, Inc. ( FATE Quick Quote FATE - Free Report) and Chewy, Inc. (class A) ( CHWY Quick Quote CHWY - Free Report) .
The top 10 holdings account for about 8.44% of total assets under management.
Performance and Risk
FNY seeks to match the performance of the Nasdaq AlphaDEX Mid Cap Growth Index before fees and expenses. The NASDAQ AlphaDEX Mid Cap Growth Index is an enhanced which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 600 Mid Cap Growth Index.
The ETF has gained about 14.40% so far this year and is up about 45.11% in the last one year (as of 02/17/2021). In the past 52-week period, it has traded between $31.56 and $74.79.
The ETF has a beta of 1.16 and standard deviation of 25.83% for the trailing three-year period, making it a medium risk choice in the space. With about 226 holdings, it effectively diversifies company-specific risk.
First Trust Mid Cap Growth AlphaDEX ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, FNY is a great option for investors seeking exposure to the Style Box - Mid Cap Growth segment of the market. There are other additional ETFs in the space that investors could consider as well.
The Vanguard MidCap Growth ETF (
VOT Quick Quote VOT - Free Report) and the iShares Russell MidCap Growth ETF ( IWP Quick Quote IWP - Free Report) track a similar index. While Vanguard MidCap Growth ETF has $10.96 billion in assets, iShares Russell MidCap Growth ETF has $16.25 billion. VOT has an expense ratio of 0.07% and IWP charges 0.24%. Bottom-Line
An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.
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.