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Is First Trust Large Cap Core AlphaDEX ETF (FEX) a Strong ETF Right Now?
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Making its debut on 05/08/2007, smart beta exchange traded fund First Trust Large Cap Core AlphaDEX ETF (FEX - Free Report) provides investors broad exposure to the Style Box - Large Cap Blend 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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
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.
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
Because the fund has amassed over $1.14 billion, this makes it one of the larger ETFs in the Style Box - Large Cap Blend. FEX is managed by First Trust Advisors. Before fees and expenses, this particular fund seeks to match the performance of the Nasdaq AlphaDEX Large Cap Core Index.
The NASDAQ AlphaDEX Large Cap Core Index is an enhanced index which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 500 Large Cap Index.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Operating expenses on an annual basis are 0.59% for this ETF, which makes it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 1.33%.
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 Financials sector - about 18.10% of the portfolio. Industrials and Healthcare round out the top three.
Taking into account individual holdings, Ford Motor Company (F - Free Report) accounts for about 0.58% of the fund's total assets, followed by United Rentals, Inc. (URI - Free Report) and Nucor Corporation (NUE - Free Report) .
The top 10 holdings account for about 5.14% of total assets under management.
Performance and Risk
So far this year, FEX has lost about -9.14%, and is down about -8.68% in the last one year (as of 11/11/2022). During this past 52-week period, the fund has traded between $72.22 and $92.98.
FEX has a beta of 1.07 and standard deviation of 26.15% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 376 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Large Cap Core AlphaDEX ETF is an excellent option for investors seeking to outperform the Style Box - Large Cap Blend segment of the market. There are other ETFs in the space which investors could consider as well.
IShares Core S&P 500 ETF (IVV - Free Report) tracks S&P 500 Index and the SPDR S&P 500 ETF (SPY - Free Report) tracks S&P 500 Index. IShares Core S&P 500 ETF has $301.50 billion in assets, SPDR S&P 500 ETF has $369.95 billion. IVV has an expense ratio of 0.03% and SPY charges 0.09%.
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 - Large Cap Blend.
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 Large Cap Core AlphaDEX ETF (FEX) a Strong ETF Right Now?
Making its debut on 05/08/2007, smart beta exchange traded fund First Trust Large Cap Core AlphaDEX ETF (FEX - Free Report) provides investors broad exposure to the Style Box - Large Cap Blend 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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
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.
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
Because the fund has amassed over $1.14 billion, this makes it one of the larger ETFs in the Style Box - Large Cap Blend. FEX is managed by First Trust Advisors. Before fees and expenses, this particular fund seeks to match the performance of the Nasdaq AlphaDEX Large Cap Core Index.
The NASDAQ AlphaDEX Large Cap Core Index is an enhanced index which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 500 Large Cap Index.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Operating expenses on an annual basis are 0.59% for this ETF, which makes it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 1.33%.
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 Financials sector - about 18.10% of the portfolio. Industrials and Healthcare round out the top three.
Taking into account individual holdings, Ford Motor Company (F - Free Report) accounts for about 0.58% of the fund's total assets, followed by United Rentals, Inc. (URI - Free Report) and Nucor Corporation (NUE - Free Report) .
The top 10 holdings account for about 5.14% of total assets under management.
Performance and Risk
So far this year, FEX has lost about -9.14%, and is down about -8.68% in the last one year (as of 11/11/2022). During this past 52-week period, the fund has traded between $72.22 and $92.98.
FEX has a beta of 1.07 and standard deviation of 26.15% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 376 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Large Cap Core AlphaDEX ETF is an excellent option for investors seeking to outperform the Style Box - Large Cap Blend segment of the market. There are other ETFs in the space which investors could consider as well.
IShares Core S&P 500 ETF (IVV - Free Report) tracks S&P 500 Index and the SPDR S&P 500 ETF (SPY - Free Report) tracks S&P 500 Index. IShares Core S&P 500 ETF has $301.50 billion in assets, SPDR S&P 500 ETF has $369.95 billion. IVV has an expense ratio of 0.03% and SPY charges 0.09%.
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 - Large Cap Blend.
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.