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Should You Invest in the First Trust Dow Jones Internet ETF (FDN)?

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Designed to provide broad exposure to the Technology - Internet segment of the equity market, the First Trust Dow Jones Internet ETF (FDN - Free Report) is a passively managed exchange traded fund launched on 06/19/2006.

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.

Investor-friendly, sector ETFs provide many options to gain low risk and diversified exposure to a broad group of companies in particular sectors. Technology - Internet is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 13, placing it in bottom 19%.

Index Details

The fund is sponsored by First Trust Advisors. It has amassed assets over $6.27 billion, making it one of the largest ETFs attempting to match the performance of the Technology - Internet segment of the equity market. FDN seeks to match the performance of the Dow Jones Internet Composite Index before fees and expenses.

The Dow Jones Internet Composite Index includes only companies whose primary focus is Internet-related.

Costs

When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.

Annual operating expenses for this ETF are 0.52%, making it on par with most peer products in the space.

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 43.60% of the portfolio. Telecom and Consumer Discretionary round out the top three.

Looking at individual holdings, Amazon.com, Inc. (AMZN - Free Report) accounts for about 9.53% of total assets, followed by Meta Platforms Inc. (class A) (META - Free Report) and Salesforce, Inc. (CRM - Free Report) .

The top 10 holdings account for about 50.90% of total assets under management.

Performance and Risk

The ETF has gained about 6.88% and is up about 37.70% so far this year and in the past one year (as of 02/19/2024), respectively. FDN has traded between $131.57 and $203.99 during this last 52-week period.

The ETF has a beta of 1.12 and standard deviation of 30.75% for the trailing three-year period, making it a high risk choice in the space. With about 43 holdings, it has more concentrated exposure than peers.

Alternatives

First Trust Dow Jones Internet 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, FDN is a great option for investors seeking exposure to the Technology ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

Amplify Transformational Data Sharing ETF (BLOK - Free Report) tracks ---------------------------------------- and the ARK Next Generation Internet ETF (ARKW - Free Report) tracks N/A. Amplify Transformational Data Sharing ETF has $1.09 billion in assets, ARK Next Generation Internet ETF has $1.69 billion. BLOK has an expense ratio of 0.75% and ARKW charges 0.88%.

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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