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Should You Invest in the First Trust NASDAQ Semiconductor ETF (FTXL)?

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The First Trust NASDAQ Semiconductor ETF (FTXL - Free Report) was launched on 09/20/2016, and is a passively managed exchange traded fund designed to offer broad exposure to the Technology - Semiconductors segment of the equity market.

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.

Additionally, sector ETFs offer convenient ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Technology - Semiconductors is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 7, placing it in top 44%.

Index Details

The fund is sponsored by First Trust Advisors. It has amassed assets over $1.06 billion, making it one of the larger ETFs attempting to match the performance of the Technology - Semiconductors segment of the equity market. FTXL seeks to match the performance of the Nasdaq US Smart Semiconductor Index before fees and expenses.

The Nasdaq US Smart Semiconductor Index is a modified factor weighted index, designed to provide exposure to US companies within the semiconductor industry.

Costs

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 0.60%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 0.74%.

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 Information Technology sector--about 100% of the portfolio.

Looking at individual holdings, Intel Corporation (INTC - Free Report) accounts for about 8.95% of total assets, followed by Broadcom Inc. (AVGO - Free Report) and Micron Technology, Inc. (MU - Free Report) .

The top 10 holdings account for about 60.76% of total assets under management.

Performance and Risk

Year-to-date, the First Trust NASDAQ Semiconductor ETF return is roughly 26.40% so far, and was up about 5.67% over the last 12 months (as of 05/30/2023). FTXL has traded between $46.03 and $67.12 in this past 52-week period.

The ETF has a beta of 1.29 and standard deviation of 34.98% for the trailing three-year period. With about 32 holdings, it has more concentrated exposure than peers.

Alternatives

First Trust NASDAQ Semiconductor ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, FTXL is a reasonable option for those seeking exposure to the Technology ETFs area of the market. Investors might also want to consider some other ETF options in the space.

IShares Semiconductor ETF (SOXX - Free Report) tracks PHLX SOX Semiconductor Sector Index and the VanEck Semiconductor ETF (SMH - Free Report) tracks MVIS US Listed Semiconductor 25 Index. IShares Semiconductor ETF has $8.52 billion in assets, VanEck Semiconductor ETF has $9.37 billion. SOXX has an expense ratio of 0.35% and SMH charges 0.35%.

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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