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Is First Trust Dow Jones Global Select Dividend ETF (FGD) a Strong ETF Right Now?

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The First Trust Dow Jones Global Select Dividend ETF (FGD - Free Report) was launched on 11/21/2007, and is a smart beta exchange traded fund designed to offer broad exposure to the Broad Developed World ETFs 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.

A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.

However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.

Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.

Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.

Fund Sponsor & Index

The fund is sponsored by First Trust Advisors. It has amassed assets over $546.90 million, making it one of the average sized ETFs in the Broad Developed World ETFs. Before fees and expenses, FGD seeks to match the performance of the Dow Jones Global Select Dividend Index.

The Dow Jones Global Select Dividend Index is an indicated annual dividend yield weighted index of 100 stocks selected from the developed-market portion of the Dow Jones World Index.

Cost & Other Expenses

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.

Operating expenses on an annual basis are 0.56% for FGD, making it on par with most peer products in the space.

FGD's 12-month trailing dividend yield is 6.46%.

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.

When you look at individual holdings, Mitsui O.s.k. Lines, Ltd. (9104.JP) accounts for about 2.49% of the fund's total assets, followed by Nippon Yusen K.k. (9101.JP) and Industrial Bank Of Korea (ibk) (024110.KS).

Its top 10 holdings account for approximately 17.14% of FGD's total assets under management.

Performance and Risk

The ETF has added about 0.98% and is up about 9.94% so far this year and in the past one year (as of 03/25/2024), respectively. FGD has traded between $19.81 and $22.98 during this last 52-week period.

The fund has a beta of 0.94 and standard deviation of 15.70% for the trailing three-year period, which makes FGD a low risk choice in this particular space. With about 99 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust Dow Jones Global Select Dividend ETF is a reasonable option for investors seeking to outperform the Broad Developed World ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

IShares MSCI ACWI ETF (ACWI - Free Report) tracks MSCI All Country World Index and the Vanguard Total World Stock ETF (VT - Free Report) tracks FTSE Global All Cap Index. IShares MSCI ACWI ETF has $19.51 billion in assets, Vanguard Total World Stock ETF has $35.36 billion. ACWI has an expense ratio of 0.32% and VT 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 Broad Developed World ETFs.

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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