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Is First Trust Consumer Discretionary AlphaDEX ETF (FXD) a Strong ETF Right Now?
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A smart beta exchange traded fund, the First Trust Consumer Discretionary AlphaDEX ETF (FXD - Free Report) debuted on 05/08/2007, and offers broad exposure to the Consumer Discretionary ETFs category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
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.
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.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
The fund is managed by First Trust Advisors, and has been able to amass over $1.59 billion, which makes it one of the largest ETFs in the Consumer Discretionary ETFs. This particular fund, before fees and expenses, seeks to match the performance of the StrataQuant Consumer Discretionary Index.
The StrataQuant Consumer Discretionary Index employs the AlphaDEX stock selection methodology to select stocks from the Russell 1000 Index.
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 0.61%, making it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 0.75%.
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.
For FXD, it has heaviest allocation in the Consumer Discretionary sector --about 79.70% of the portfolio --while Telecom and Industrials round out the top three.
Taking into account individual holdings, Nexstar Media Group, Inc. (NXST - Free Report) accounts for about 1.80% of the fund's total assets, followed by Kohl's Corporation (KSS - Free Report) and Lithia Motors, Inc. (LAD - Free Report) .
Its top 10 holdings account for approximately 15.16% of FXD's total assets under management.
Performance and Risk
The ETF has lost about -11.07% and is down about -4.60% so far this year and in the past one year (as of 03/28/2022), respectively. FXD has traded between $51.73 and $65.57 during this last 52-week period.
The fund has a beta of 1.38 and standard deviation of 30.67% for the trailing three-year period, which makes FXD a medium risk choice in this particular space. With about 124 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 $6.03 billion in assets, Consumer Discretionary Select Sector SPDR ETF has $19.24 billion. VCR has an expense ratio of 0.10% and XLY 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 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?
A smart beta exchange traded fund, the First Trust Consumer Discretionary AlphaDEX ETF (FXD - Free Report) debuted on 05/08/2007, and offers broad exposure to the Consumer Discretionary ETFs category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
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.
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.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
The fund is managed by First Trust Advisors, and has been able to amass over $1.59 billion, which makes it one of the largest ETFs in the Consumer Discretionary ETFs. This particular fund, before fees and expenses, seeks to match the performance of the StrataQuant Consumer Discretionary Index.
The StrataQuant Consumer Discretionary Index employs the AlphaDEX stock selection methodology to select stocks from the Russell 1000 Index.
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 0.61%, making it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 0.75%.
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.
For FXD, it has heaviest allocation in the Consumer Discretionary sector --about 79.70% of the portfolio --while Telecom and Industrials round out the top three.
Taking into account individual holdings, Nexstar Media Group, Inc. (NXST - Free Report) accounts for about 1.80% of the fund's total assets, followed by Kohl's Corporation (KSS - Free Report) and Lithia Motors, Inc. (LAD - Free Report) .
Its top 10 holdings account for approximately 15.16% of FXD's total assets under management.
Performance and Risk
The ETF has lost about -11.07% and is down about -4.60% so far this year and in the past one year (as of 03/28/2022), respectively. FXD has traded between $51.73 and $65.57 during this last 52-week period.
The fund has a beta of 1.38 and standard deviation of 30.67% for the trailing three-year period, which makes FXD a medium risk choice in this particular space. With about 124 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 $6.03 billion in assets, Consumer Discretionary Select Sector SPDR ETF has $19.24 billion. VCR has an expense ratio of 0.10% and XLY 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 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.