Making its debut on 05/08/2007, smart beta exchange traded fund First Trust Technology AlphaDEX ETF (
FXL Quick Quote FXL - Free Report) provides investors broad exposure to the Technology ETFs category of the market. What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
The fund is managed by First Trust Advisors. FXL has been able to amass assets over $1.10 billion, making it one of the larger ETFs in the Technology ETFs. This particular fund, before fees and expenses, seeks to match the performance of the StrataQuant Technology Index.
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.
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.
Annual operating expenses for this ETF are 0.61%, making it on par with most peer products in the space.
FXL's 12-month trailing dividend yield is 0.32%.
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.
For FXL, it 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) .
Its top 10 holdings account for approximately 19.03% of FXL's total assets under management.
Performance and Risk
The ETF has lost about -24.45% and is down about -16.92% so far this year and in the past one year (as of 07/20/2022), respectively. FXL has traded between $91.32 and $138.38 during this last 52-week period.
The ETF has a beta of 1.18 and standard deviation of 30.95% 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 is an excellent option for investors seeking to outperform the Technology ETFs segment of the market. There are other ETFs in the space which 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 $40.11 billion in assets, Vanguard Information Technology ETF has $42.55 billion. XLK has an expense ratio of 0.10% and VGT charges 0.10%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Technology ETFs.
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.