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Should First Trust Growth Strength ETF (FTGS) Be on Your Investing Radar?

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The First Trust Growth Strength ETF (FTGS - Free Report) was launched on 10/25/2022, and is a passively managed exchange traded fund designed to offer broad exposure to the Large Cap Growth segment of the US equity market.

The fund is sponsored by First Trust Advisors. It has amassed assets over $762.13 million, making it one of the average sized ETFs attempting to match the Large Cap Growth segment of the US equity market.

Why Large Cap Growth

Companies that fall in the large cap category tend to have a market capitalization above $10 billion. They tend to be stable companies with predictable cash flows and are usually less volatile than mid and small cap companies.

While growth stocks do boast higher than average sales and earnings growth rates, and they are expected to grow faster than the wider market, investors should note these kinds of stocks have higher valuations. Also, growth stocks are a type of equity that carries more risk compared to others. Even though growth stocks are more likely to outperform their value counterparts in strong bull markets, value stocks have a record of delivering better returns in almost all markets than growth stocks.

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 0.60%, putting it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 0.33%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Information Technology sector--about 30.70% of the portfolio. Financials and Industrials round out the top three.

Looking at individual holdings, W.r. Berkley Corporation (WRB - Free Report) accounts for about 2.37% of total assets, followed by Renaissancere Holdings Ltd. (RNR - Free Report) and Workday, Inc. (class A) (WDAY - Free Report) .

The top 10 holdings account for about 22.44% of total assets under management.

Performance and Risk

FTGS seeks to match the performance of the THE GROWTH STRENGTH INDEX before fees and expenses. The Growth Strength Index provides exposure to a mix of domestic equities with filters for liquidity, return on equity, long-term debt, revenue and cash flow growth.

The ETF has gained about 17.46% so far this year and it's up approximately 32.32% in the last one year (as of 10/14/2024). In the past 52-week period, it has traded between $22.83 and $31.93.

The ETF has a beta of 1.11 and standard deviation of 16.10% for the trailing three-year period. With about 51 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust Growth Strength 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, FTGS is an excellent option for investors seeking exposure to the Style Box - Large Cap Growth segment of the market. There are other additional ETFs in the space that investors could consider as well.

The Vanguard Growth ETF (VUG - Free Report) and the Invesco QQQ (QQQ - Free Report) track a similar index. While Vanguard Growth ETF has $142.14 billion in assets, Invesco QQQ has $295.26 billion. VUG has an expense ratio of 0.04% and QQQ charges 0.20%.

Bottom-Line

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.

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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