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Is First Trust Small Cap Growth AlphaDEX ETF (FYC) a Strong ETF Right Now?
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Launched on 04/19/2011, the First Trust Small Cap Growth AlphaDEX ETF (FYC - Free Report) is a smart beta exchange traded fund offering broad exposure to the Style Box - Small Cap Growth category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
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.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
FYC is managed by First Trust Advisors, and this fund has amassed over $202.24 million, which makes it one of the average sized ETFs in the Style Box - Small Cap Growth. This particular fund seeks to match the performance of the Nasdaq AlphaDEX Small Cap Growth Index before fees and expenses.
The NASDAQ AlphaDEX Small Cap Growth Index is an enhanced which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 700 Small Cap Growth Index.
Cost & Other Expenses
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
With one of the more expensive products in the space, this ETF has annual operating expenses of 0.70%.
It's 12-month trailing dividend yield comes in at 0.78%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Healthcare sector - about 18.20% of the portfolio. Information Technology and Consumer Discretionary round out the top three.
Taking into account individual holdings, Lantheus Holdings, Inc. (LNTH - Free Report) accounts for about 0.88% of the fund's total assets, followed by Mgp Ingredients, Inc. (MGPI - Free Report) and Arch Resources Inc. (ARCH - Free Report) .
Its top 10 holdings account for approximately 8.03% of FYC's total assets under management.
Performance and Risk
Year-to-date, the First Trust Small Cap Growth AlphaDEX ETF has lost about -19.65% so far, and is down about -14.09% over the last 12 months (as of 08/03/2022). FYC has traded between $52.17 and $80.47 in this past 52-week period.
The ETF has a beta of 1.21 and standard deviation of 32.33% for the trailing three-year period, making it a high risk choice in the space. With about 263 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Small Cap Growth AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - Small Cap Growth segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Russell 2000 Growth ETF (IWO - Free Report) tracks Russell 2000 Growth Index and the Vanguard SmallCap Growth ETF (VBK - Free Report) tracks CRSP U.S. Small Cap Growth Index. IShares Russell 2000 Growth ETF has $9.85 billion in assets, Vanguard SmallCap Growth ETF has $13.03 billion. IWO has an expense ratio of 0.24% and VBK charges 0.07%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Small Cap Growth.
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 Small Cap Growth AlphaDEX ETF (FYC) a Strong ETF Right Now?
Launched on 04/19/2011, the First Trust Small Cap Growth AlphaDEX ETF (FYC - Free Report) is a smart beta exchange traded fund offering broad exposure to the Style Box - Small Cap Growth category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
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.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
FYC is managed by First Trust Advisors, and this fund has amassed over $202.24 million, which makes it one of the average sized ETFs in the Style Box - Small Cap Growth. This particular fund seeks to match the performance of the Nasdaq AlphaDEX Small Cap Growth Index before fees and expenses.
The NASDAQ AlphaDEX Small Cap Growth Index is an enhanced which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 700 Small Cap Growth Index.
Cost & Other Expenses
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
With one of the more expensive products in the space, this ETF has annual operating expenses of 0.70%.
It's 12-month trailing dividend yield comes in at 0.78%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Healthcare sector - about 18.20% of the portfolio. Information Technology and Consumer Discretionary round out the top three.
Taking into account individual holdings, Lantheus Holdings, Inc. (LNTH - Free Report) accounts for about 0.88% of the fund's total assets, followed by Mgp Ingredients, Inc. (MGPI - Free Report) and Arch Resources Inc. (ARCH - Free Report) .
Its top 10 holdings account for approximately 8.03% of FYC's total assets under management.
Performance and Risk
Year-to-date, the First Trust Small Cap Growth AlphaDEX ETF has lost about -19.65% so far, and is down about -14.09% over the last 12 months (as of 08/03/2022). FYC has traded between $52.17 and $80.47 in this past 52-week period.
The ETF has a beta of 1.21 and standard deviation of 32.33% for the trailing three-year period, making it a high risk choice in the space. With about 263 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Small Cap Growth AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - Small Cap Growth segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Russell 2000 Growth ETF (IWO - Free Report) tracks Russell 2000 Growth Index and the Vanguard SmallCap Growth ETF (VBK - Free Report) tracks CRSP U.S. Small Cap Growth Index. IShares Russell 2000 Growth ETF has $9.85 billion in assets, Vanguard SmallCap Growth ETF has $13.03 billion. IWO has an expense ratio of 0.24% and VBK charges 0.07%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Small Cap Growth.
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.