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Is First Trust Consumer Discretionary AlphaDEX ETF (FXD) a Strong ETF Right Now?
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A smart beta exchange traded fund, the First Trust Consumer Discretionary AlphaDEX ETF (FXD - Free Report) debuted on 05/08/2007, and offers 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.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
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.
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.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
FXD is managed by First Trust Advisors, and this fund has amassed over $389.25 million, which makes it one of the larger ETFs in the Consumer Discretionary ETFs. Before fees and expenses, this particular fund 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
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Annual operating expenses for this ETF are 0.61%, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 0.88%.
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 FXD, it has heaviest allocation in the Consumer Discretionary sector --about 79.90% of the portfolio --while Telecom and Industrials round out the top three.
Taking into account individual holdings, Pvh Corp. (PVH - Free Report) accounts for about 1.54% of the fund's total assets, followed by Wynn Resorts, Limited (WYNN - Free Report) and Thor Industries, Inc. (THO - Free Report) .
The top 10 holdings account for about 14.72% of total assets under management.
Performance and Risk
So far this year, FXD has gained about 13.02%, and is down about -7.79% in the last one year (as of 02/10/2023). During this past 52-week period, the fund has traded between $43.02 and $58.76.
FXD has a beta of 1.31 and standard deviation of 33.71% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 122 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 $4.18 billion in assets, Consumer Discretionary Select Sector SPDR ETF has $14.72 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?
A smart beta exchange traded fund, the First Trust Consumer Discretionary AlphaDEX ETF (FXD - Free Report) debuted on 05/08/2007, and offers 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.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
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.
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.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
FXD is managed by First Trust Advisors, and this fund has amassed over $389.25 million, which makes it one of the larger ETFs in the Consumer Discretionary ETFs. Before fees and expenses, this particular fund 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
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Annual operating expenses for this ETF are 0.61%, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 0.88%.
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 FXD, it has heaviest allocation in the Consumer Discretionary sector --about 79.90% of the portfolio --while Telecom and Industrials round out the top three.
Taking into account individual holdings, Pvh Corp. (PVH - Free Report) accounts for about 1.54% of the fund's total assets, followed by Wynn Resorts, Limited (WYNN - Free Report) and Thor Industries, Inc. (THO - Free Report) .
The top 10 holdings account for about 14.72% of total assets under management.
Performance and Risk
So far this year, FXD has gained about 13.02%, and is down about -7.79% in the last one year (as of 02/10/2023). During this past 52-week period, the fund has traded between $43.02 and $58.76.
FXD has a beta of 1.31 and standard deviation of 33.71% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 122 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 $4.18 billion in assets, Consumer Discretionary Select Sector SPDR ETF has $14.72 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.