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Is First Trust Multi Cap Growth AlphaDEX ETF (FAD) a Strong ETF Right Now?
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The First Trust Multi Cap Growth AlphaDEX ETF (FAD - Free Report) made its debut on 05/08/2007, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - All Cap Growth category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
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 managed by First Trust Advisors, and has been able to amass over $249.01 million, which makes it one of the average sized ETFs in the Style Box - All Cap Growth. Before fees and expenses, this particular fund seeks to match the performance of the Nasdaq AlphaDEX Multi Cap Growth Index.
The NASDAQ AlphaDEX Multi Cap Growth Index is an enhanced which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 500 Large Cap Index, NASDAQ US 600 Mid Cap Index and NASDAQ US 700 Small Cap 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.
Annual operating expenses for this ETF are 0.63%, making it on par with most peer products in the space.
FAD's 12-month trailing dividend yield is 0.04%.
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.
FAD's heaviest allocation is in the Information Technology sector, which is about 25.40% of the portfolio. Its Healthcare and Consumer Discretionary round out the top three.
When you look at individual holdings, Cloudflare, Inc. (class A) (NET - Free Report) accounts for about 0.69% of the fund's total assets, followed by Hubspot, Inc. (HUBS - Free Report) and Zscaler, Inc. (ZS - Free Report) .
FAD's top 10 holdings account for about 5.07% of its total assets under management.
Performance and Risk
Year-to-date, the First Trust Multi Cap Growth AlphaDEX ETF has added about 18.76% so far, and is up roughly 21.45% over the last 12 months (as of 12/14/2021). FAD has traded between $102.10 and $131.39 in this past 52-week period.
FAD has a beta of 1.08 and standard deviation of 25.79% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 676 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Multi Cap Growth AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Growth segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Morningstar Growth ETF (ILCG - Free Report) tracks MORNINGSTAR US LARGE-MID CP BRD GRWTH ID and the iShares Core S&P U.S. Growth ETF (IUSG - Free Report) tracks S&P 900 Growth Index. IShares Morningstar Growth ETF has $2.22 billion in assets, iShares Core S&P U.S. Growth ETF has $13.79 billion. ILCG has an expense ratio of 0.04% and IUSG charges 0.04%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - All Cap Growth.
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 Multi Cap Growth AlphaDEX ETF (FAD) a Strong ETF Right Now?
The First Trust Multi Cap Growth AlphaDEX ETF (FAD - Free Report) made its debut on 05/08/2007, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - All Cap Growth category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
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 managed by First Trust Advisors, and has been able to amass over $249.01 million, which makes it one of the average sized ETFs in the Style Box - All Cap Growth. Before fees and expenses, this particular fund seeks to match the performance of the Nasdaq AlphaDEX Multi Cap Growth Index.
The NASDAQ AlphaDEX Multi Cap Growth Index is an enhanced which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 500 Large Cap Index, NASDAQ US 600 Mid Cap Index and NASDAQ US 700 Small Cap 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.
Annual operating expenses for this ETF are 0.63%, making it on par with most peer products in the space.
FAD's 12-month trailing dividend yield is 0.04%.
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.
FAD's heaviest allocation is in the Information Technology sector, which is about 25.40% of the portfolio. Its Healthcare and Consumer Discretionary round out the top three.
When you look at individual holdings, Cloudflare, Inc. (class A) (NET - Free Report) accounts for about 0.69% of the fund's total assets, followed by Hubspot, Inc. (HUBS - Free Report) and Zscaler, Inc. (ZS - Free Report) .
FAD's top 10 holdings account for about 5.07% of its total assets under management.
Performance and Risk
Year-to-date, the First Trust Multi Cap Growth AlphaDEX ETF has added about 18.76% so far, and is up roughly 21.45% over the last 12 months (as of 12/14/2021). FAD has traded between $102.10 and $131.39 in this past 52-week period.
FAD has a beta of 1.08 and standard deviation of 25.79% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 676 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Multi Cap Growth AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Growth segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Morningstar Growth ETF (ILCG - Free Report) tracks MORNINGSTAR US LARGE-MID CP BRD GRWTH ID and the iShares Core S&P U.S. Growth ETF (IUSG - Free Report) tracks S&P 900 Growth Index. IShares Morningstar Growth ETF has $2.22 billion in assets, iShares Core S&P U.S. Growth ETF has $13.79 billion. ILCG has an expense ratio of 0.04% and IUSG charges 0.04%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - All Cap Growth.
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.