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Is First Trust Large Cap Core AlphaDEX ETF (FEX) a Strong ETF Right Now?
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The First Trust Large Cap Core AlphaDEX ETF (FEX - Free Report) made its debut on 05/08/2007, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - Large Cap Blend 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.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
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.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
FEX is managed by First Trust Advisors, and this fund has amassed over $1.04 billion, which makes it one of the larger ETFs in the Style Box - Large Cap Blend. Before fees and expenses, this particular fund seeks to match the performance of the Nasdaq AlphaDEX Large Cap Core Index.
The NASDAQ AlphaDEX Large Cap Core Index is an enhanced index which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 500 Large Cap 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 0.59% for FEX, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 1.75%.
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 FEX, it has heaviest allocation in the Industrials sector --about 14.90% of the portfolio --while Financials and Information Technology round out the top three.
Looking at individual holdings, Meta Platforms Inc. (class A) (META - Free Report) accounts for about 0.79% of total assets, followed by Fedex Corporation (FDX - Free Report) and Skyworks Solutions, Inc. (SWKS - Free Report) .
Its top 10 holdings account for approximately 5.71% of FEX's total assets under management.
Performance and Risk
Year-to-date, the First Trust Large Cap Core AlphaDEX ETF has lost about -2.23% so far, and is down about -3.31% over the last 12 months (as of 05/26/2023). FEX has traded between $72.22 and $86.44 in this past 52-week period.
The fund has a beta of 1.06 and standard deviation of 18.74% for the trailing three-year period, which makes FEX a medium risk choice in this particular space. With about 376 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Large Cap Core AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Core S&P 500 ETF (IVV - Free Report) tracks S&P 500 Index and the SPDR S&P 500 ETF (SPY - Free Report) tracks S&P 500 Index. IShares Core S&P 500 ETF has $309.15 billion in assets, SPDR S&P 500 ETF has $386.84 billion. IVV has an expense ratio of 0.03% and SPY charges 0.09%.
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 - Large Cap Blend.
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 Large Cap Core AlphaDEX ETF (FEX) a Strong ETF Right Now?
The First Trust Large Cap Core AlphaDEX ETF (FEX - Free Report) made its debut on 05/08/2007, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - Large Cap Blend 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.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
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.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
FEX is managed by First Trust Advisors, and this fund has amassed over $1.04 billion, which makes it one of the larger ETFs in the Style Box - Large Cap Blend. Before fees and expenses, this particular fund seeks to match the performance of the Nasdaq AlphaDEX Large Cap Core Index.
The NASDAQ AlphaDEX Large Cap Core Index is an enhanced index which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 500 Large Cap 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 0.59% for FEX, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 1.75%.
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 FEX, it has heaviest allocation in the Industrials sector --about 14.90% of the portfolio --while Financials and Information Technology round out the top three.
Looking at individual holdings, Meta Platforms Inc. (class A) (META - Free Report) accounts for about 0.79% of total assets, followed by Fedex Corporation (FDX - Free Report) and Skyworks Solutions, Inc. (SWKS - Free Report) .
Its top 10 holdings account for approximately 5.71% of FEX's total assets under management.
Performance and Risk
Year-to-date, the First Trust Large Cap Core AlphaDEX ETF has lost about -2.23% so far, and is down about -3.31% over the last 12 months (as of 05/26/2023). FEX has traded between $72.22 and $86.44 in this past 52-week period.
The fund has a beta of 1.06 and standard deviation of 18.74% for the trailing three-year period, which makes FEX a medium risk choice in this particular space. With about 376 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Large Cap Core AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Core S&P 500 ETF (IVV - Free Report) tracks S&P 500 Index and the SPDR S&P 500 ETF (SPY - Free Report) tracks S&P 500 Index. IShares Core S&P 500 ETF has $309.15 billion in assets, SPDR S&P 500 ETF has $386.84 billion. IVV has an expense ratio of 0.03% and SPY charges 0.09%.
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 - Large Cap Blend.
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.