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

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Designed to provide broad exposure to the Broad Developed World ETFs category of the market, the First Trust Dow Jones Global Select Dividend ETF (FGD - Free Report) is a smart beta exchange traded fund launched on 11/21/2007.

What Are Smart Beta ETFs?

Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.

Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.

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.

This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.

Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.

Fund Sponsor & Index

The fund is sponsored by First Trust Advisors. It has amassed assets over $452.63 million, making it one of the average sized ETFs in the Broad Developed World ETFs. This particular fund, before fees and expenses, 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

Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.

Operating expenses on an annual basis are 0.59% for FGD, making it one of the more expensive products in the space.

It has a 12-month trailing dividend yield of 3.88%.

Sector Exposure and Top Holdings

ETFs offer 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.

Looking at individual holdings, Labrador Iron Ore Royalty Corp. (LIF.CN) accounts for about 1.79% of total assets, followed by Fortescue Metals Group Limited (FMG.AU) and Enagas S.a. (ENG.SM).

The top 10 holdings account for about 15.48% of total assets under management.

Performance and Risk

The ETF has added about 17.05% so far this year and is up about 56.65% in the last one year (as of 04/13/2021). In the past 52-week period, it has traded between $15.62 and $25.53.

FGD has a beta of 1.06 and standard deviation of 24.98% for the trailing three-year period, which makes the fund a low risk choice in the space. With about 100 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 $16.30 billion in assets, Vanguard Total World Stock ETF has $18.93 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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