Launched on 05/08/2007, the First Trust Energy AlphaDEX ETF (
FXN Quick Quote FXN - Free Report) is a passively managed exchange traded fund designed to provide a broad exposure to the Energy - Broad segment of the equity market.
Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also 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. Energy - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 1, placing it in top 6%.
The fund is sponsored by First Trust Advisors. It has amassed assets over $1.83 billion, making it one of the larger ETFs attempting to match the performance of the Energy - Broad segment of the equity market. FXN seeks to match the performance of the StrataQuant Energy Index before fees and expenses.
The StrataQuant Energy 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.
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 0.64%, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.51%.
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 Energy sector--about 89.10% of the portfolio. Information Technology and Industrials round out the top three.
Looking at individual holdings, Continental Resources, Inc. accounts for about 5.44% of total assets, followed by Occidental Petroleum Corporation (
OXY Quick Quote OXY - Free Report) and Hess Corporation ( HES Quick Quote HES - Free Report) .
The top 10 holdings account for about 46.93% of total assets under management.
Performance and Risk
Year-to-date, the First Trust Energy AlphaDEX ETF has added roughly 41.61% so far, and is up about 61.37% over the last 12 months (as of 09/20/2022). FXN has traded between $10.49 and $18.74 in this past 52-week period.
The ETF has a beta of 1.86 and standard deviation of 48.49% for the trailing three-year period, making it a high risk choice in the space. With about 38 holdings, it has more concentrated exposure than peers.
First Trust Energy 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, FXN is an outstanding option for investors seeking exposure to the Energy ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.
Vanguard Energy ETF (
VDE Quick Quote VDE - Free Report) tracks MSCI US Investable Market Energy 25/50 Index and the Energy Select Sector SPDR ETF ( XLE Quick Quote XLE - Free Report) tracks Energy Select Sector Index. Vanguard Energy ETF has $7.75 billion in assets, Energy Select Sector SPDR ETF has $35.74 billion. VDE has an expense ratio of 0.10% and XLE charges 0.10%. Bottom Line
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