We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Is First Trust Multi Cap Growth AlphaDEX ETF (FAD) a Strong ETF Right Now?
Read MoreHide Full Article
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?
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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
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.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is managed by First Trust Advisors. FAD has been able to amass assets over $206.04 million, making it one of the average sized ETFs in the Style Box - All Cap Growth. Before fees and expenses, FAD 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
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.
Operating expenses on an annual basis are 0.63% for this ETF, which makes it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 0.16%.
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.
Representing 22.40% of the portfolio, the fund has heaviest allocation to the Information Technology sector; Healthcare and Consumer Discretionary round out the top three.
Looking at individual holdings, Cheniere Energy, Inc. (LNG - Free Report) accounts for about 0.65% of total assets, followed by Nucor Corporation (NUE - Free Report) and Abbvie Inc. (ABBV - Free Report) .
The top 10 holdings account for about 5.39% of total assets under management.
Performance and Risk
So far this year, FAD has lost about -12.78%, and is down about -4.13% in the last one year (as of 04/19/2022). During this past 52-week period, the fund has traded between $102.79 and $131.39.
The fund has a beta of 1.10 and standard deviation of 26.37% for the trailing three-year period, which makes FAD a medium risk choice in this particular space. With about 675 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 $1.87 billion in assets, iShares Core S&P U.S. Growth ETF has $12.18 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.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
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?
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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
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.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is managed by First Trust Advisors. FAD has been able to amass assets over $206.04 million, making it one of the average sized ETFs in the Style Box - All Cap Growth. Before fees and expenses, FAD 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
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.
Operating expenses on an annual basis are 0.63% for this ETF, which makes it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 0.16%.
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.
Representing 22.40% of the portfolio, the fund has heaviest allocation to the Information Technology sector; Healthcare and Consumer Discretionary round out the top three.
Looking at individual holdings, Cheniere Energy, Inc. (LNG - Free Report) accounts for about 0.65% of total assets, followed by Nucor Corporation (NUE - Free Report) and Abbvie Inc. (ABBV - Free Report) .
The top 10 holdings account for about 5.39% of total assets under management.
Performance and Risk
So far this year, FAD has lost about -12.78%, and is down about -4.13% in the last one year (as of 04/19/2022). During this past 52-week period, the fund has traded between $102.79 and $131.39.
The fund has a beta of 1.10 and standard deviation of 26.37% for the trailing three-year period, which makes FAD a medium risk choice in this particular space. With about 675 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 $1.87 billion in assets, iShares Core S&P U.S. Growth ETF has $12.18 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.