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Should You Invest in the First Trust Consumer Discretionary AlphaDEX ETF (FXD)?

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Designed to provide broad exposure to the Consumer Discretionary - Broad segment of the equity market, the First Trust Consumer Discretionary AlphaDEX ETF (FXD - Free Report) is 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 11, placing it in bottom 31%.

Index Details

The fund is sponsored by First Trust Advisors. It has amassed assets over $1.67 billion, making it one of the larger 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.

Costs

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 0.63%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 0.36%.

Sector Exposure

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. 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 72.90% of the portfolio. Telecom and Industrials round out the top three.

The top 10 holdings account for about 17.17% of total assets under management.

Performance and Risk

The ETF return is roughly 20.26% and it's up approximately 107.77% so far this year and in the past one year (as of 03/15/2021), respectively. FXD has traded between $23.18 and $60.08 during this last 52-week period.

The ETF has a beta of 1.45 and standard deviation of 29.74% 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.

Alternatives

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 an outstanding 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 - Free Report) tracks MSCI US Investable Market Consumer Discretionary 25/50 Index and the Consumer Discretionary Select Sector SPDR ETF (XLY - Free Report) tracks Consumer Discretionary Select Sector Index. Vanguard Consumer Discretionary ETF has $5.31 billion in assets, Consumer Discretionary Select Sector SPDR ETF has $19.60 billion. VCR has an expense ratio of 0.10% and XLY charges 0.12%.

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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