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Is First Trust Consumer Discretionary AlphaDEX ETF (FXD) a Strong ETF Right Now?
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The First Trust Consumer Discretionary AlphaDEX ETF (FXD - Free Report) made its debut on 05/08/2007, and is a smart beta exchange traded fund that provides broad exposure to the Consumer Discretionary ETFs category of the market.
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.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
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
Because the fund has amassed over $1.95 billion, this makes it one of the largest ETFs in the Consumer Discretionary ETFs. FXD is managed by First Trust Advisors. 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 & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Operating expenses on an annual basis are 0.63% for FXD, making it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 0.24%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
FXD's heaviest allocation is in the Consumer Discretionary sector, which is about 77.90% of the portfolio. Its Telecom and Industrials round out the top three.
Taking into account individual holdings, Graham Holdings Company (GHC - Free Report) accounts for about 1.75% of the fund's total assets, followed by Qurate Retail, Inc. (class A) (QRTEA - Free Report) and Fox Corporation (class A) (FOXA - Free Report) .
The top 10 holdings account for about 15.98% of total assets under management.
Performance and Risk
The ETF has added about 22.77% so far this year and is up roughly 60.96% in the last one year (as of 07/13/2021). In the past 52-week period, it has traded between $38.01 and $61.76.
FXD has a beta of 1.44 and standard deviation of 29.91% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 114 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Consumer Discretionary AlphaDEX ETF is a reasonable option for investors seeking to outperform the Consumer Discretionary ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
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 $6.37 billion in assets, Consumer Discretionary Select Sector SPDR ETF has $20.82 billion. VCR has an expense ratio of 0.10% and XLY charges 0.12%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Consumer Discretionary 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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Is First Trust Consumer Discretionary AlphaDEX ETF (FXD) a Strong ETF Right Now?
The First Trust Consumer Discretionary AlphaDEX ETF (FXD - Free Report) made its debut on 05/08/2007, and is a smart beta exchange traded fund that provides broad exposure to the Consumer Discretionary ETFs category of the market.
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.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
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
Because the fund has amassed over $1.95 billion, this makes it one of the largest ETFs in the Consumer Discretionary ETFs. FXD is managed by First Trust Advisors. 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 & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Operating expenses on an annual basis are 0.63% for FXD, making it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 0.24%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
FXD's heaviest allocation is in the Consumer Discretionary sector, which is about 77.90% of the portfolio. Its Telecom and Industrials round out the top three.
Taking into account individual holdings, Graham Holdings Company (GHC - Free Report) accounts for about 1.75% of the fund's total assets, followed by Qurate Retail, Inc. (class A) (QRTEA - Free Report) and Fox Corporation (class A) (FOXA - Free Report) .
The top 10 holdings account for about 15.98% of total assets under management.
Performance and Risk
The ETF has added about 22.77% so far this year and is up roughly 60.96% in the last one year (as of 07/13/2021). In the past 52-week period, it has traded between $38.01 and $61.76.
FXD has a beta of 1.44 and standard deviation of 29.91% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 114 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Consumer Discretionary AlphaDEX ETF is a reasonable option for investors seeking to outperform the Consumer Discretionary ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
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 $6.37 billion in assets, Consumer Discretionary Select Sector SPDR ETF has $20.82 billion. VCR has an expense ratio of 0.10% and XLY charges 0.12%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Consumer Discretionary 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.