Looking for broad exposure to the Technology - Broad segment of the equity market? You should consider the First Trust Technology AlphaDEX ETF (
FXL Quick Quote FXL - Free Report) , a passively managed exchange traded fund launched on 05/08/2007.
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. Technology - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 9, placing it in bottom 44%.
The fund is sponsored by First Trust Advisors. It has amassed assets over $1.05 billion, making it one of the larger ETFs attempting to match the performance of the Technology - Broad segment of the equity market. FXL seeks to match the performance of the StrataQuant Technology Index before fees and expenses.
The StrataQuant Technology 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.
Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.
Annual operating expenses for this ETF are 0.61%, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.33%.
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 Information Technology sector--about 90.40% of the portfolio.
Looking at individual holdings, Advanced Micro Devices, Inc. (
AMD Quick Quote AMD - Free Report) accounts for about 2.76% of total assets, followed by Amdocs Limited ( DOX Quick Quote DOX - Free Report) and Hewlett Packard Enterprise Company ( HPE Quick Quote HPE - Free Report) .
The top 10 holdings account for about 19.03% of total assets under management.
Performance and Risk
So far this year, FXL has lost about -27.92%, and is down about -23.66% in the last one year (as of 07/13/2022). During this past 52-week period, the fund has traded between $91.32 and $138.38.
The ETF has a beta of 1.18 and standard deviation of 30.86% for the trailing three-year period, making it a medium risk choice in the space. With about 108 holdings, it effectively diversifies company-specific risk.
First Trust Technology AlphaDEX ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, FXL is an outstanding option for investors seeking exposure to the Technology ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.
Technology Select Sector SPDR ETF (
XLK Quick Quote XLK - Free Report) tracks Technology Select Sector Index and the Vanguard Information Technology ETF ( VGT Quick Quote VGT - Free Report) tracks MSCI US Investable Market Information Technology 25/50 Index. Technology Select Sector SPDR ETF has $38.63 billion in assets, Vanguard Information Technology ETF has $40.75 billion. XLK has an expense ratio of 0.10% and VGT charges 0.10%. Bottom Line
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Zacks ETF Center.