We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Is First Trust Consumer Discretionary AlphaDEX ETF (FXD) a Strong ETF Right Now?
Read MoreHide Full Article
A smart beta exchange traded fund, the First Trust Consumer Discretionary AlphaDEX ETF (FXD - Free Report) debuted on 05/08/2007, and offers broad exposure to the Consumer Discretionary 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.
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.
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.
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.
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
Managed by First Trust Advisors, FXD has amassed assets over $1.44 billion, making it one of the largest ETFs in the Consumer Discretionary ETFs. FXD seeks to match the performance of the StrataQuant Consumer Discretionary Index before fees and expenses.
The StrataQuant Consumer Discretionary Index employs the AlphaDEX stock selection methodology to select stocks from the Russell 1000 Index.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Operating expenses on an annual basis are 0.61% for this ETF, which makes it on par with most peer products in the space.
FXD's 12-month trailing dividend yield is 0.63%.
Sector Exposure and Top Holdings
ETFs offer 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.
For FXD, it has heaviest allocation in the Consumer Discretionary sector --about 77.30% of the portfolio --while Industrials and Telecom round out the top three.
When you look at individual holdings, Spotify Technology S.a. (SPOT - Free Report) accounts for about 1.80% of the fund's total assets, followed by Wingstop Inc. (WING - Free Report) and Uber Technologies, Inc. (UBER - Free Report) .
FXD's top 10 holdings account for about 15.87% of its total assets under management.
Performance and Risk
The ETF has lost about -0.67% so far this year and it's up approximately 12.69% in the last one year (as of 05/01/2024). In the past 52-week period, it has traded between $46.79 and $64.54.
FXD has a beta of 1.37 and standard deviation of 23.33% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 121 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Consumer Discretionary AlphaDEX ETF is a reasonable option for investors seeking to outperform the Consumer Discretionary ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Consumer Discretionary ETF (VCR - Free Report) tracks MSCI US Investable Market Consumer Discretionary 25/50 Index and the Consumer Discretionary Select Sector SPDR ETF (XLY - Free Report) tracks Consumer Discretionary Select Sector Index. Vanguard Consumer Discretionary ETF has $5.35 billion in assets, Consumer Discretionary Select Sector SPDR ETF has $19.24 billion. VCR has an expense ratio of 0.10% and XLY 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 Consumer Discretionary 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.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Is First Trust Consumer Discretionary AlphaDEX ETF (FXD) a Strong ETF Right Now?
A smart beta exchange traded fund, the First Trust Consumer Discretionary AlphaDEX ETF (FXD - Free Report) debuted on 05/08/2007, and offers broad exposure to the Consumer Discretionary 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.
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.
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.
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.
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
Managed by First Trust Advisors, FXD has amassed assets over $1.44 billion, making it one of the largest ETFs in the Consumer Discretionary ETFs. FXD seeks to match the performance of the StrataQuant Consumer Discretionary Index before fees and expenses.
The StrataQuant Consumer Discretionary Index employs the AlphaDEX stock selection methodology to select stocks from the Russell 1000 Index.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Operating expenses on an annual basis are 0.61% for this ETF, which makes it on par with most peer products in the space.
FXD's 12-month trailing dividend yield is 0.63%.
Sector Exposure and Top Holdings
ETFs offer 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.
For FXD, it has heaviest allocation in the Consumer Discretionary sector --about 77.30% of the portfolio --while Industrials and Telecom round out the top three.
When you look at individual holdings, Spotify Technology S.a. (SPOT - Free Report) accounts for about 1.80% of the fund's total assets, followed by Wingstop Inc. (WING - Free Report) and Uber Technologies, Inc. (UBER - Free Report) .
FXD's top 10 holdings account for about 15.87% of its total assets under management.
Performance and Risk
The ETF has lost about -0.67% so far this year and it's up approximately 12.69% in the last one year (as of 05/01/2024). In the past 52-week period, it has traded between $46.79 and $64.54.
FXD has a beta of 1.37 and standard deviation of 23.33% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 121 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Consumer Discretionary AlphaDEX ETF is a reasonable option for investors seeking to outperform the Consumer Discretionary ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Consumer Discretionary ETF (VCR - Free Report) tracks MSCI US Investable Market Consumer Discretionary 25/50 Index and the Consumer Discretionary Select Sector SPDR ETF (XLY - Free Report) tracks Consumer Discretionary Select Sector Index. Vanguard Consumer Discretionary ETF has $5.35 billion in assets, Consumer Discretionary Select Sector SPDR ETF has $19.24 billion. VCR has an expense ratio of 0.10% and XLY 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 Consumer Discretionary 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.