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Should You Invest in the First Trust NASDAQ Clean Edge Smart Grid Infrastructure ETF (GRID)?

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Launched on 11/16/2009, the First Trust NASDAQ Clean Edge Smart Grid Infrastructure ETF (GRID - Free Report) is a passively managed exchange traded fund designed to provide a broad exposure to the Utilities - Infrastructure segment of the equity market.

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.

Investor-friendly, sector ETFs provide many options to gain low risk and diversified exposure to a broad group of companies in particular sectors. Utilities - Infrastructure is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 2, placing it in top 13%.

Index Details

The fund is sponsored by First Trust Advisors. It has amassed assets over $789.20 million, making it one of the average sized ETFs attempting to match the performance of the Utilities - Infrastructure segment of the equity market. GRID seeks to match the performance of the NASDAQ OMX Clean Edge Smart Grid Infrastructure Index before fees and expenses.

The NASDAQ OMX Clean Edge Smart Grid Infrastructure Index includes companies that are primarily engaged and involved in electric grid, electric meters and devices, networks, energy storage and management, and enabling software used by the smart grid infrastructure sector.

Costs

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for this ETF are 0.58%, making it one of the more expensive products in the space.

It has a 12-month trailing dividend yield of 1.28%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

Looking at individual holdings, Eaton Corporation Plc (ETN - Free Report) accounts for about 10.19% of total assets, followed by Abb Ltd (ABBN.SW) and Schneider Electric Se (SU.FP).

The top 10 holdings account for about 58.64% of total assets under management.

Performance and Risk

The ETF has lost about -3.66% so far this year and it's up approximately 17.18% in the last one year (as of 01/04/2024). In that past 52-week period, it has traded between $85.32 and $107.86.

The ETF has a beta of 1.27 and standard deviation of 21.52% for the trailing three-year period, making it a high risk choice in the space. With about 85 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust NASDAQ Clean Edge Smart Grid Infrastructure 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, GRID is an outstanding option for investors seeking exposure to the Utilities/Infrastructure ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

IShares Global Infrastructure ETF (IGF - Free Report) tracks S&P Global Infrastructure Index and the Global X U.S. Infrastructure Development ETF (PAVE - Free Report) tracks INDXX U.S. Infrastructure Development Index. IShares Global Infrastructure ETF has $3.67 billion in assets, Global X U.S. Infrastructure Development ETF has $5.52 billion. IGF has an expense ratio of 0.41% and PAVE charges 0.47%.

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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