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Is First Trust Mid Cap Value AlphaDEX ETF (FNK) a Strong ETF Right Now?
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Launched on 04/19/2011, the First Trust Mid Cap Value AlphaDEX ETF (FNK - Free Report) is a smart beta exchange traded fund offering broad exposure to the Style Box - Mid Cap Value category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
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.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
Because the fund has amassed over $227.70 million, this makes it one of the average sized ETFs in the Style Box - Mid Cap Value. FNK is managed by First Trust Advisors. This particular fund seeks to match the performance of the Nasdaq AlphaDEX Mid Cap Value Index before fees and expenses.
The NASDAQ AlphaDEX Mid Cap Value Index is an enhanced index which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 600 Mid Cap Value Index.
Cost & Other Expenses
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 cousins, other things remaining the same.
Annual operating expenses for FNK are 0.70%, which makes it one of the most expensive products in the space.
It has a 12-month trailing dividend yield of 1.64%.
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.
FNK's heaviest allocation is in the Consumer Discretionary sector, which is about 23% of the portfolio. Its Financials and Industrials round out the top three.
Taking into account individual holdings, Pultegroup, Inc. (PHM - Free Report) accounts for about 0.96% of the fund's total assets, followed by Reliance Steel & Aluminum Co. (RS - Free Report) and Taylor Morrison Home Corporation (TMHC - Free Report) .
The top 10 holdings account for about 8.86% of total assets under management.
Performance and Risk
The ETF has added about 5.43% so far this year and was up about 10.95% in the last one year (as of 06/14/2023). In the past 52-week period, it has traded between $38.16 and $50.05.
The fund has a beta of 1.29 and standard deviation of 24.22% for the trailing three-year period, which makes FNK a medium risk choice in this particular space. With about 226 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Mid Cap Value AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - Mid Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Russell Mid-Cap Value ETF (IWS - Free Report) tracks Russell MidCap Value Index and the Vanguard Mid-Cap Value ETF (VOE - Free Report) tracks CRSP U.S. Mid Cap Value Index. IShares Russell Mid-Cap Value ETF has $12.52 billion in assets, Vanguard Mid-Cap Value ETF has $16.03 billion. IWS has an expense ratio of 0.23% and VOE charges 0.07%.
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 - Mid Cap Value.
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 Mid Cap Value AlphaDEX ETF (FNK) a Strong ETF Right Now?
Launched on 04/19/2011, the First Trust Mid Cap Value AlphaDEX ETF (FNK - Free Report) is a smart beta exchange traded fund offering broad exposure to the Style Box - Mid Cap Value category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
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.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
Because the fund has amassed over $227.70 million, this makes it one of the average sized ETFs in the Style Box - Mid Cap Value. FNK is managed by First Trust Advisors. This particular fund seeks to match the performance of the Nasdaq AlphaDEX Mid Cap Value Index before fees and expenses.
The NASDAQ AlphaDEX Mid Cap Value Index is an enhanced index which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 600 Mid Cap Value Index.
Cost & Other Expenses
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 cousins, other things remaining the same.
Annual operating expenses for FNK are 0.70%, which makes it one of the most expensive products in the space.
It has a 12-month trailing dividend yield of 1.64%.
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.
FNK's heaviest allocation is in the Consumer Discretionary sector, which is about 23% of the portfolio. Its Financials and Industrials round out the top three.
Taking into account individual holdings, Pultegroup, Inc. (PHM - Free Report) accounts for about 0.96% of the fund's total assets, followed by Reliance Steel & Aluminum Co. (RS - Free Report) and Taylor Morrison Home Corporation (TMHC - Free Report) .
The top 10 holdings account for about 8.86% of total assets under management.
Performance and Risk
The ETF has added about 5.43% so far this year and was up about 10.95% in the last one year (as of 06/14/2023). In the past 52-week period, it has traded between $38.16 and $50.05.
The fund has a beta of 1.29 and standard deviation of 24.22% for the trailing three-year period, which makes FNK a medium risk choice in this particular space. With about 226 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Mid Cap Value AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - Mid Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Russell Mid-Cap Value ETF (IWS - Free Report) tracks Russell MidCap Value Index and the Vanguard Mid-Cap Value ETF (VOE - Free Report) tracks CRSP U.S. Mid Cap Value Index. IShares Russell Mid-Cap Value ETF has $12.52 billion in assets, Vanguard Mid-Cap Value ETF has $16.03 billion. IWS has an expense ratio of 0.23% and VOE charges 0.07%.
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 - Mid Cap Value.
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.