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Should You Invest in the First Trust Water ETF (FIW)?

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Looking for broad exposure to the Industrials - Water segment of the equity market? You should consider the First Trust Water ETF (FIW - Free Report) , a passively managed exchange traded fund launched on 05/08/2007.

While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

Sector ETFs also provide investors access to a broad group of companies in particular sectors that offer low risk and diversified exposure. Industrials - Water is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 1, placing it in top 6%.

Index Details

The fund is sponsored by First Trust Advisors. It has amassed assets over $1.30 billion, making it one of the larger ETFs attempting to match the performance of the Industrials - Water segment of the equity market. FIW seeks to match the performance of the ISE Clean Edge Water Index before fees and expenses.

The ISE Clean Edge Water Index is a modified market capitalization-weighted index comprised of exchange-listed companies that derive a substantial portion of their revenues from the potable and wastewater industry.

Costs

When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.

Annual operating expenses for this ETF are 0.53%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 0.63%.

Sector Exposure and Top Holdings

ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Industrials sector--about 53.50% of the portfolio. Utilities and Healthcare round out the top three.

Looking at individual holdings, Idexx Laboratories, Inc. (IDXX - Free Report) accounts for about 4.25% of total assets, followed by American Water Works Company, Inc. (AWK - Free Report) and Ecolab Inc. (ECL - Free Report) .

The top 10 holdings account for about 40.74% of total assets under management.

Performance and Risk

The ETF return is roughly 4.80% and is up about 3.89% so far this year and in the past one year (as of 04/25/2023), respectively. FIW has traded between $67.71 and $86.50 during this last 52-week period.

The ETF has a beta of 1.01 and standard deviation of 21.33% for the trailing three-year period, making it a medium risk choice in the space. With about 37 holdings, it has more concentrated exposure than peers.

Alternatives

First Trust Water ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, FIW is an outstanding option for investors seeking exposure to the Industrials ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

Invesco S&P Global Water Index ETF (CGW - Free Report) tracks S&P GLOBAL WATER INDEX and the Invesco Water Resources ETF (PHO - Free Report) tracks NASDAQ OMX US Water Index. Invesco S&P Global Water Index ETF has $983.96 million in assets, Invesco Water Resources ETF has $1.77 billion. CGW has an expense ratio of 0.57% and PHO charges 0.59%.

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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