Looking for broad exposure to the Energy - Broad segment of the equity market? You should consider the First Trust Energy AlphaDEX ETF (
FXN Quick Quote FXN - Free Report) , a passively managed exchange traded fund launched on 05/08/2007.
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.
Investor-friendly, sector ETFs provide many options 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 16, placing it in bottom 0%.
The fund is sponsored by First Trust Advisors. It has amassed assets over $730.59 million, 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.
Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.
Annual operating expenses for this ETF are 0.61%, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 3.90%.
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.
This ETF has heaviest allocation in the Energy sector--about 96.30% of the portfolio.
Looking at individual holdings, Halliburton Company (
HAL Quick Quote HAL - Free Report) accounts for about 4.40% of total assets, followed by Pdc Energy, Inc. and Targa Resources Corp. ( TRGP Quick Quote TRGP - Free Report) .
The top 10 holdings account for about 40.03% of total assets under management.
Performance and Risk
So far this year, FXN has lost about -11.36%, and is down about -5.08% in the last one year (as of 03/28/2023). During this past 52-week period, the fund has traded between $14.03 and $19.40.
The ETF has a beta of 1.81 and standard deviation of 42.28% for the trailing three-year period, making it a high risk choice in the space. With about 41 holdings, it has more concentrated exposure than peers.
First Trust Energy AlphaDEX ETF sports a Zacks ETF Rank of 4 (Sell), which is based on expected asset class return, expense ratio, and momentum, among other factors. FXN, then, is not a great choice for investors seeking exposure to the Energy ETFs segment of the market. However, there are better ETFs in the space to consider.
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 $7.57 billion in assets, Energy Select Sector SPDR ETF has $36.43 billion. VDE has an expense ratio of 0.10% and XLE charges 0.10%. Bottom Line
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