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Is First Trust Consumer Discretionary AlphaDEX ETF (FXD) a Strong ETF Right Now?
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Making its debut on 05/08/2007, smart beta exchange traded fund First Trust Consumer Discretionary AlphaDEX ETF (FXD - Free Report) provides investors broad exposure to the Consumer Discretionary ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
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. FXD has been able to amass assets over $391.38 million, making it one of the larger ETFs in the Consumer Discretionary ETFs. FXD, before fees and expenses, seeks to match the performance of the StrataQuant Consumer Discretionary Index.
The StrataQuant Consumer Discretionary Index employs the AlphaDEX stock selection methodology to select stocks from the Russell 1000 Index.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.61%.
The fund has a 12-month trailing dividend yield of 1.07%.
Sector Exposure and Top Holdings
ETFs offer 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.
Representing 81.10% of the portfolio, the fund has heaviest allocation to the Consumer Discretionary sector; Telecom and Industrials round out the top three.
Taking into account individual holdings, Penske Automotive Group, Inc. (PAG - Free Report) accounts for about 1.91% of the fund's total assets, followed by Autonation, Inc. (AN - Free Report) and Ollie's Bargain Outlet Holdings, Inc. (OLLI - Free Report) .
FXD's top 10 holdings account for about 16.82% of its total assets under management.
Performance and Risk
The ETF has lost about -20.42% and is down about -19.04% so far this year and in the past one year (as of 08/03/2022), respectively. FXD has traded between $43.78 and $65.57 during this last 52-week period.
The fund has a beta of 1.31 and standard deviation of 32.53% for the trailing three-year period, which makes FXD a medium risk choice in this particular space. With about 123 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Consumer Discretionary AlphaDEX ETF is a reasonable option for investors seeking to outperform the Consumer Discretionary ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Consumer Discretionary ETF (VCR - Free Report) tracks MSCI US Investable Market Consumer Discretionary 25/50 Index and the Consumer Discretionary Select Sector SPDR ETF (XLY - Free Report) tracks Consumer Discretionary Select Sector Index. Vanguard Consumer Discretionary ETF has $4.94 billion in assets, Consumer Discretionary Select Sector SPDR ETF has $15.71 billion. VCR has an expense ratio of 0.10% and XLY 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 Consumer Discretionary ETFs.
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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Is First Trust Consumer Discretionary AlphaDEX ETF (FXD) a Strong ETF Right Now?
Making its debut on 05/08/2007, smart beta exchange traded fund First Trust Consumer Discretionary AlphaDEX ETF (FXD - Free Report) provides investors broad exposure to the Consumer Discretionary ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
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. FXD has been able to amass assets over $391.38 million, making it one of the larger ETFs in the Consumer Discretionary ETFs. FXD, before fees and expenses, seeks to match the performance of the StrataQuant Consumer Discretionary Index.
The StrataQuant Consumer Discretionary Index employs the AlphaDEX stock selection methodology to select stocks from the Russell 1000 Index.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.61%.
The fund has a 12-month trailing dividend yield of 1.07%.
Sector Exposure and Top Holdings
ETFs offer 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.
Representing 81.10% of the portfolio, the fund has heaviest allocation to the Consumer Discretionary sector; Telecom and Industrials round out the top three.
Taking into account individual holdings, Penske Automotive Group, Inc. (PAG - Free Report) accounts for about 1.91% of the fund's total assets, followed by Autonation, Inc. (AN - Free Report) and Ollie's Bargain Outlet Holdings, Inc. (OLLI - Free Report) .
FXD's top 10 holdings account for about 16.82% of its total assets under management.
Performance and Risk
The ETF has lost about -20.42% and is down about -19.04% so far this year and in the past one year (as of 08/03/2022), respectively. FXD has traded between $43.78 and $65.57 during this last 52-week period.
The fund has a beta of 1.31 and standard deviation of 32.53% for the trailing three-year period, which makes FXD a medium risk choice in this particular space. With about 123 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Consumer Discretionary AlphaDEX ETF is a reasonable option for investors seeking to outperform the Consumer Discretionary ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Consumer Discretionary ETF (VCR - Free Report) tracks MSCI US Investable Market Consumer Discretionary 25/50 Index and the Consumer Discretionary Select Sector SPDR ETF (XLY - Free Report) tracks Consumer Discretionary Select Sector Index. Vanguard Consumer Discretionary ETF has $4.94 billion in assets, Consumer Discretionary Select Sector SPDR ETF has $15.71 billion. VCR has an expense ratio of 0.10% and XLY 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 Consumer Discretionary ETFs.
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.