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Is First Trust Consumer Staples AlphaDEX ETF (FXG) a Strong ETF Right Now?
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Making its debut on 05/08/2007, smart beta exchange traded fund First Trust Consumer Staples AlphaDEX ETF (FXG - Free Report) provides investors broad exposure to the Consumer Staples 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.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as 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
Managed by First Trust Advisors, FXG has amassed assets over $336.54 million, making it one of the average sized ETFs in the Consumer Staples ETFs. Before fees and expenses, this particular fund seeks to match the performance of the StrataQuant Consumer Staples Index.
The StrataQuant Consumer Staples Index is a modified equal-dollar weighted index designed by the AMEX to objectively identify and select stocks from the Russell 1000 Index that may generate positive alpha relative to traditional passive style indices through the use of the AlphaDEX screening methodology.
Cost & Other Expenses
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Annual operating expenses for this ETF are 0.64%, making it one of the most expensive products in the space.
FXG's 12-month trailing dividend yield is 1.38%.
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.
FXG's heaviest allocation is in the Consumer Staples sector, which is about 86.80% of the portfolio. Its Healthcare and Materials round out the top three.
Taking into account individual holdings, Archer-Daniels-Midland Company (ADM - Free Report) accounts for about 4.78% of the fund's total assets, followed by Bunge Limited (BG - Free Report) and Mckesson Corporation (MCK - Free Report) .
Its top 10 holdings account for approximately 41.75% of FXG's total assets under management.
Performance and Risk
The ETF has lost about -0.61% so far this year and is up about 10.43% in the last one year (as of 03/17/2022). In the past 52-week period, it has traded between $55.06 and $63.90.
The ETF has a beta of 0.70 and standard deviation of 18.49% for the trailing three-year period, making it a medium risk choice in the space. With about 41 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust Consumer Staples AlphaDEX ETF is a reasonable option for investors seeking to outperform the Consumer Staples ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Consumer Staples ETF (VDC - Free Report) tracks MSCI US Investable Market Consumer Staples 25/50 Index and the Consumer Staples Select Sector SPDR ETF (XLP - Free Report) tracks Consumer Staples Select Sector Index. Vanguard Consumer Staples ETF has $6.66 billion in assets, Consumer Staples Select Sector SPDR ETF has $15.44 billion. VDC has an expense ratio of 0.10% and XLP charges 0.10%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Consumer Staples 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 Staples AlphaDEX ETF (FXG) a Strong ETF Right Now?
Making its debut on 05/08/2007, smart beta exchange traded fund First Trust Consumer Staples AlphaDEX ETF (FXG - Free Report) provides investors broad exposure to the Consumer Staples 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.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as 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
Managed by First Trust Advisors, FXG has amassed assets over $336.54 million, making it one of the average sized ETFs in the Consumer Staples ETFs. Before fees and expenses, this particular fund seeks to match the performance of the StrataQuant Consumer Staples Index.
The StrataQuant Consumer Staples Index is a modified equal-dollar weighted index designed by the AMEX to objectively identify and select stocks from the Russell 1000 Index that may generate positive alpha relative to traditional passive style indices through the use of the AlphaDEX screening methodology.
Cost & Other Expenses
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Annual operating expenses for this ETF are 0.64%, making it one of the most expensive products in the space.
FXG's 12-month trailing dividend yield is 1.38%.
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.
FXG's heaviest allocation is in the Consumer Staples sector, which is about 86.80% of the portfolio. Its Healthcare and Materials round out the top three.
Taking into account individual holdings, Archer-Daniels-Midland Company (ADM - Free Report) accounts for about 4.78% of the fund's total assets, followed by Bunge Limited (BG - Free Report) and Mckesson Corporation (MCK - Free Report) .
Its top 10 holdings account for approximately 41.75% of FXG's total assets under management.
Performance and Risk
The ETF has lost about -0.61% so far this year and is up about 10.43% in the last one year (as of 03/17/2022). In the past 52-week period, it has traded between $55.06 and $63.90.
The ETF has a beta of 0.70 and standard deviation of 18.49% for the trailing three-year period, making it a medium risk choice in the space. With about 41 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust Consumer Staples AlphaDEX ETF is a reasonable option for investors seeking to outperform the Consumer Staples ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Consumer Staples ETF (VDC - Free Report) tracks MSCI US Investable Market Consumer Staples 25/50 Index and the Consumer Staples Select Sector SPDR ETF (XLP - Free Report) tracks Consumer Staples Select Sector Index. Vanguard Consumer Staples ETF has $6.66 billion in assets, Consumer Staples Select Sector SPDR ETF has $15.44 billion. VDC has an expense ratio of 0.10% and XLP charges 0.10%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Consumer Staples 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.