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Is First Trust Small Cap Growth AlphaDEX ETF (FYC) a Strong ETF Right Now?
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The First Trust Small Cap Growth AlphaDEX ETF (FYC - Free Report) was launched on 04/19/2011, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - Small Cap Growth 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.
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.
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.
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
Because the fund has amassed over $220.88 million, this makes it one of the average sized ETFs in the Style Box - Small Cap Growth. FYC is managed by First Trust Advisors. Before fees and expenses, this particular fund seeks to match the performance of the Nasdaq AlphaDEX Small Cap Growth Index.
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
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.
Operating expenses on an annual basis are 0.71% for FYC, making it one of the more expensive products in the space.
FYC's 12-month trailing dividend yield is 0%.
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 Information Technology sector - about 21.10% of the portfolio. Industrials and Healthcare round out the top three.
Looking at individual holdings, Axcelis Technologies, Inc. (ACLS - Free Report) accounts for about 0.75% of total assets, followed by Transocean Ltd. (RIG - Free Report) and Array Technologies, Inc. (ARRY - Free Report) .
The top 10 holdings account for about 7.14% of total assets under management.
Performance and Risk
The ETF has gained about 8.05% and is down about -10.47% so far this year and in the past one year (as of 02/28/2023), respectively. FYC has traded between $52.17 and $70.51 during this last 52-week period.
The ETF has a beta of 1.19 and standard deviation of 33.46% for the trailing three-year period, making it a high risk choice in the space. With about 264 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Small Cap Growth AlphaDEX ETF is an excellent option for investors seeking to outperform the Style Box - Small Cap Growth segment of the market. There are other ETFs in the space which investors could consider as well.
IShares Russell 2000 Growth ETF (IWO - Free Report) tracks Russell 2000 Growth Index and the Vanguard Small-Cap Growth ETF (VBK - Free Report) tracks CRSP U.S. Small Cap Growth Index. IShares Russell 2000 Growth ETF has $9.64 billion in assets, Vanguard Small-Cap Growth ETF has $13.16 billion. IWO has an expense ratio of 0.23% 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?
The First Trust Small Cap Growth AlphaDEX ETF (FYC - Free Report) was launched on 04/19/2011, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - Small Cap Growth 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.
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.
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.
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
Because the fund has amassed over $220.88 million, this makes it one of the average sized ETFs in the Style Box - Small Cap Growth. FYC is managed by First Trust Advisors. Before fees and expenses, this particular fund seeks to match the performance of the Nasdaq AlphaDEX Small Cap Growth Index.
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
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.
Operating expenses on an annual basis are 0.71% for FYC, making it one of the more expensive products in the space.
FYC's 12-month trailing dividend yield is 0%.
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 Information Technology sector - about 21.10% of the portfolio. Industrials and Healthcare round out the top three.
Looking at individual holdings, Axcelis Technologies, Inc. (ACLS - Free Report) accounts for about 0.75% of total assets, followed by Transocean Ltd. (RIG - Free Report) and Array Technologies, Inc. (ARRY - Free Report) .
The top 10 holdings account for about 7.14% of total assets under management.
Performance and Risk
The ETF has gained about 8.05% and is down about -10.47% so far this year and in the past one year (as of 02/28/2023), respectively. FYC has traded between $52.17 and $70.51 during this last 52-week period.
The ETF has a beta of 1.19 and standard deviation of 33.46% for the trailing three-year period, making it a high risk choice in the space. With about 264 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Small Cap Growth AlphaDEX ETF is an excellent option for investors seeking to outperform the Style Box - Small Cap Growth segment of the market. There are other ETFs in the space which investors could consider as well.
IShares Russell 2000 Growth ETF (IWO - Free Report) tracks Russell 2000 Growth Index and the Vanguard Small-Cap Growth ETF (VBK - Free Report) tracks CRSP U.S. Small Cap Growth Index. IShares Russell 2000 Growth ETF has $9.64 billion in assets, Vanguard Small-Cap Growth ETF has $13.16 billion. IWO has an expense ratio of 0.23% 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.