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Should You Invest in the First Trust Financials AlphaDEX ETF (FXO)?
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Designed to provide broad exposure to the Financials - Broad segment of the equity market, the First Trust Financials AlphaDEX ETF (FXO - Free Report) is a passively managed exchange traded fund launched on 05/08/2007.
Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.
Sector ETFs are also funds of convenience, offering many ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Financials - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 6, placing it in top 38%.
Index Details
The fund is sponsored by First Trust Advisors. It has amassed assets over $1.15 billion, making it one of the larger ETFs attempting to match the performance of the Financials - Broad segment of the equity market. FXO seeks to match the performance of the StrataQuant Financials Index before fees and expenses.
The StrataQuant Financials 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.
Costs
When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.
Annual operating expenses for this ETF are 0.61%, making it one of the more expensive products in the space.
It has a 12-month trailing dividend yield of 2.19%.
Sector Exposure and Top Holdings
ETFs offer a 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.
This ETF has heaviest allocation in the Financials sector--about 100% of the portfolio.
Looking at individual holdings, Markel Corporation (MKL - Free Report) accounts for about 1.97% of total assets, followed by Berkshire Hathaway Inc. (class B) (BRK/B) and Cincinnati Financial Corporation (CINF - Free Report) .
The top 10 holdings account for about 17.73% of total assets under management.
Performance and Risk
The ETF has lost about -13.64% so far this year and is down about -8.24% in the last one year (as of 06/28/2022). In that past 52-week period, it has traded between $37.52 and $48.61.
The ETF has a beta of 1.12 and standard deviation of 33.92% for the trailing three-year period, making it a medium risk choice in the space. With about 104 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Financials 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, FXO is a great option for investors seeking exposure to the Financials ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.
Vanguard Financials ETF (VFH - Free Report) tracks MSCI US Investable Market Financials 25/50 Index and the Financial Select Sector SPDR ETF (XLF - Free Report) tracks Financial Select Sector Index. Vanguard Financials ETF has $8.80 billion in assets, Financial Select Sector SPDR ETF has $30.29 billion. VFH has an expense ratio of 0.10% and XLF charges 0.10%.
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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Should You Invest in the First Trust Financials AlphaDEX ETF (FXO)?
Designed to provide broad exposure to the Financials - Broad segment of the equity market, the First Trust Financials AlphaDEX ETF (FXO - Free Report) is a passively managed exchange traded fund launched on 05/08/2007.
Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.
Sector ETFs are also funds of convenience, offering many ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Financials - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 6, placing it in top 38%.
Index Details
The fund is sponsored by First Trust Advisors. It has amassed assets over $1.15 billion, making it one of the larger ETFs attempting to match the performance of the Financials - Broad segment of the equity market. FXO seeks to match the performance of the StrataQuant Financials Index before fees and expenses.
The StrataQuant Financials 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.
Costs
When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.
Annual operating expenses for this ETF are 0.61%, making it one of the more expensive products in the space.
It has a 12-month trailing dividend yield of 2.19%.
Sector Exposure and Top Holdings
ETFs offer a 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.
This ETF has heaviest allocation in the Financials sector--about 100% of the portfolio.
Looking at individual holdings, Markel Corporation (MKL - Free Report) accounts for about 1.97% of total assets, followed by Berkshire Hathaway Inc. (class B) (BRK/B) and Cincinnati Financial Corporation (CINF - Free Report) .
The top 10 holdings account for about 17.73% of total assets under management.
Performance and Risk
The ETF has lost about -13.64% so far this year and is down about -8.24% in the last one year (as of 06/28/2022). In that past 52-week period, it has traded between $37.52 and $48.61.
The ETF has a beta of 1.12 and standard deviation of 33.92% for the trailing three-year period, making it a medium risk choice in the space. With about 104 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Financials 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, FXO is a great option for investors seeking exposure to the Financials ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.
Vanguard Financials ETF (VFH - Free Report) tracks MSCI US Investable Market Financials 25/50 Index and the Financial Select Sector SPDR ETF (XLF - Free Report) tracks Financial Select Sector Index. Vanguard Financials ETF has $8.80 billion in assets, Financial Select Sector SPDR ETF has $30.29 billion. VFH has an expense ratio of 0.10% and XLF charges 0.10%.
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.