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Is First Trust Dow 30 Equal Weight ETF (EDOW) a Strong ETF Right Now?
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A smart beta exchange traded fund, the First Trust Dow 30 Equal Weight ETF (EDOW - Free Report) debuted on 08/08/2017, and offers 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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix 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
The fund is managed by First Trust Advisors, and has been able to amass over $250.83 million, which makes it one of the average sized ETFs in the Style Box - Large Cap Blend. This particular fund, before fees and expenses, seeks to match the performance of the Dow Jones Industrial Average Equal Weight Index.
The Dow Jones Industrial Average Equal Weight Index is an equally weighted index designed to be a price neutral version of the price-weighted DJIA.
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.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.50%.
It has a 12-month trailing dividend yield of 1.90%.
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.
This ETF has heaviest allocation in the Information Technology sector - about 21.80% of the portfolio. Financials and Healthcare round out the top three.
When you look at individual holdings, Caterpillar Inc. (CAT - Free Report) accounts for about 3.91% of the fund's total assets, followed by Intel Corporation (INTC - Free Report) and Amgen Inc. (AMGN - Free Report) .
The top 10 holdings account for about 36.36% of total assets under management.
Performance and Risk
The ETF has gained about 6.43% and was up about 5.72% so far this year and in the past one year (as of 11/17/2023), respectively. EDOW has traded between $28.08 and $31.03 during this last 52-week period.
EDOW has a beta of 0.91 and standard deviation of 14.81% for the trailing three-year period. With about 31 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust Dow 30 Equal Weight 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 $369.69 billion in assets, SPDR S&P 500 ETF has $423.58 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 Dow 30 Equal Weight ETF (EDOW) a Strong ETF Right Now?
A smart beta exchange traded fund, the First Trust Dow 30 Equal Weight ETF (EDOW - Free Report) debuted on 08/08/2017, and offers 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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix 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
The fund is managed by First Trust Advisors, and has been able to amass over $250.83 million, which makes it one of the average sized ETFs in the Style Box - Large Cap Blend. This particular fund, before fees and expenses, seeks to match the performance of the Dow Jones Industrial Average Equal Weight Index.
The Dow Jones Industrial Average Equal Weight Index is an equally weighted index designed to be a price neutral version of the price-weighted DJIA.
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.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.50%.
It has a 12-month trailing dividend yield of 1.90%.
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.
This ETF has heaviest allocation in the Information Technology sector - about 21.80% of the portfolio. Financials and Healthcare round out the top three.
When you look at individual holdings, Caterpillar Inc. (CAT - Free Report) accounts for about 3.91% of the fund's total assets, followed by Intel Corporation (INTC - Free Report) and Amgen Inc. (AMGN - Free Report) .
The top 10 holdings account for about 36.36% of total assets under management.
Performance and Risk
The ETF has gained about 6.43% and was up about 5.72% so far this year and in the past one year (as of 11/17/2023), respectively. EDOW has traded between $28.08 and $31.03 during this last 52-week period.
EDOW has a beta of 0.91 and standard deviation of 14.81% for the trailing three-year period. With about 31 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust Dow 30 Equal Weight 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 $369.69 billion in assets, SPDR S&P 500 ETF has $423.58 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.