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Should You Invest in the First Trust NASDAQ Clean Edge Smart Grid Infrastructure ETF (GRID)?

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The First Trust NASDAQ Clean Edge Smart Grid Infrastructure ETF (GRID - Free Report) was launched on 11/16/2009, and is a passively managed exchange traded fund designed to offer broad exposure to the Utilities - Infrastructure segment of the equity market.

While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

Sector ETFs also provide investors access to a broad group of companies in particular sectors that offer low risk and diversified exposure. Utilities - Infrastructure is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 8, placing it in top 50%.

Index Details

The fund is sponsored by First Trust Advisors. It has amassed assets over $692 million, making it one of the average sized ETFs attempting to match the performance of the Utilities - Infrastructure segment of the equity market. GRID seeks to match the performance of the NASDAQ OMX Clean Edge Smart Grid Infrastructure Index before fees and expenses.

The NASDAQ OMX Clean Edge Smart Grid Infrastructure Index includes companies that are primarily engaged and involved in electric grid, electric meters and devices, networks, energy storage and management, and enabling software used by the smart grid infrastructure sector.

Costs

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for this ETF are 0.63%, making it one of the most expensive products in the space.

It has a 12-month trailing dividend yield of 0.81%.

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.

Looking at individual holdings, Abb Ltd (ABBN.SW) accounts for about 8.55% of total assets, followed by Eaton Corporation Plc (ETN - Free Report) and Schneider Electric Se (SU.FP).

The top 10 holdings account for about 60.81% of total assets under management.

Performance and Risk

Year-to-date, the First Trust NASDAQ Clean Edge Smart Grid Infrastructure ETF has lost about -12.53% so far, and it's up approximately 2.84% over the last 12 months (as of 04/12/2022). GRID has traded between $83.69 and $105.89 in this past 52-week period.

The ETF has a beta of 1.20 and standard deviation of 27.92% for the trailing three-year period, making it a high risk choice in the space. With about 73 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust NASDAQ Clean Edge Smart Grid Infrastructure ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, GRID is an outstanding option for investors seeking exposure to the Utilities/Infrastructure ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

IShares Global Infrastructure ETF (IGF - Free Report) tracks S&P Global Infrastructure Index and the Global X U.S. Infrastructure Development ETF (PAVE - Free Report) tracks INDXX U.S. Infrastructure Development Index. IShares Global Infrastructure ETF has $3.45 billion in assets, Global X U.S. Infrastructure Development ETF has $4.87 billion. IGF has an expense ratio of 0.43% and PAVE charges 0.47%.

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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