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Is First Trust Consumer Discretionary AlphaDEX ETF (FXD) a Strong ETF Right Now?
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Making its debut on 05/08/2007, smart beta exchange traded fund First Trust Consumer Discretionary AlphaDEX ETF (FXD - Free Report) provides investors broad exposure to the Consumer Discretionary ETFs 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.
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.
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.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
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
Managed by First Trust Advisors, FXD has amassed assets over $1.25 billion, making it one of the largest ETFs in the Consumer Discretionary ETFs. This particular fund, before fees and expenses, 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
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Operating expenses on an annual basis are 0.61% for this ETF, which makes it on par with most peer products in the space.
FXD's 12-month trailing dividend yield is 1.06%.
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.
For FXD, it has heaviest allocation in the Consumer Discretionary sector --about 79.30% 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) .
Its top 10 holdings account for approximately 14.72% of FXD's total assets under management.
Performance and Risk
So far this year, FXD return is roughly 6.96%, and is down about -4.37% in the last one year (as of 04/14/2023). During this past 52-week period, the fund has traded between $43.02 and $56.93.
The fund has a beta of 1.30 and standard deviation of 26.85% for the trailing three-year period, which makes FXD a medium risk choice in this particular 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 $4.11 billion in assets, Consumer Discretionary Select Sector SPDR ETF has $14.25 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?
Making its debut on 05/08/2007, smart beta exchange traded fund First Trust Consumer Discretionary AlphaDEX ETF (FXD - Free Report) provides investors broad exposure to the Consumer Discretionary ETFs 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.
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.
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.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
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
Managed by First Trust Advisors, FXD has amassed assets over $1.25 billion, making it one of the largest ETFs in the Consumer Discretionary ETFs. This particular fund, before fees and expenses, 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
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Operating expenses on an annual basis are 0.61% for this ETF, which makes it on par with most peer products in the space.
FXD's 12-month trailing dividend yield is 1.06%.
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.
For FXD, it has heaviest allocation in the Consumer Discretionary sector --about 79.30% 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) .
Its top 10 holdings account for approximately 14.72% of FXD's total assets under management.
Performance and Risk
So far this year, FXD return is roughly 6.96%, and is down about -4.37% in the last one year (as of 04/14/2023). During this past 52-week period, the fund has traded between $43.02 and $56.93.
The fund has a beta of 1.30 and standard deviation of 26.85% for the trailing three-year period, which makes FXD a medium risk choice in this particular 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 $4.11 billion in assets, Consumer Discretionary Select Sector SPDR ETF has $14.25 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.