Launched on 05/08/2007, the First Trust Health Care AlphaDEX ETF (
FXH Quick Quote FXH - Free Report) is a passively managed exchange traded fund designed to provide a broad exposure to the Healthcare - Broad segment of the equity market.
Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.
Additionally, sector ETFs offer convenient ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Healthcare - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 8, placing it in top 50%.
The fund is sponsored by First Trust Advisors. It has amassed assets over $1.43 billion, making it one of the larger ETFs attempting to match the performance of the Healthcare - Broad segment of the equity market. FXH seeks to match the performance of the StrataQuant Health Care Index before fees and expenses.
The StrataQuant Health Care Index employs the AlphaDEX stock selection methodology to select stocks from the Russell 1000 Index.
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.
Annual operating expenses for this ETF are 0.61%, making it on par with most peer products in the space.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Healthcare sector--about 100% of the portfolio.
Looking at individual holdings, Abbvie Inc. (
ABBV Quick Quote ABBV - Free Report) accounts for about 2.47% of total assets, followed by Universal Health Services, Inc. (class B) ( UHS Quick Quote UHS - Free Report) and Regeneron Pharmaceuticals, Inc. ( REGN Quick Quote REGN - Free Report) .
The top 10 holdings account for about 21.91% of total assets under management.
Performance and Risk
Year-to-date, the First Trust Health Care AlphaDEX ETF has lost about -11.82% so far, and is down about -6.85% over the last 12 months (as of 04/28/2022). FXH has traded between $106.27 and $128.11 in this past 52-week period.
The ETF has a beta of 0.86 and standard deviation of 22.87% for the trailing three-year period, making it a medium risk choice in the space. With about 86 holdings, it effectively diversifies company-specific risk.
First Trust Health Care AlphaDEX 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, FXH is an outstanding option for investors seeking exposure to the Health Care ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.
Vanguard Health Care ETF (
VHT Quick Quote VHT - Free Report) tracks MSCI US Investable Market Health Care 25/50 Index and the Health Care Select Sector SPDR ETF ( XLV Quick Quote XLV - Free Report) tracks Health Care Select Sector Index. Vanguard Health Care ETF has $16.24 billion in assets, Health Care Select Sector SPDR ETF has $37.01 billion. VHT has an expense ratio of 0.10% and XLV charges 0.10%. Bottom Line
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