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

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Looking for broad exposure to the Technology - Internet segment of the equity market? You should consider the First Trust Dow Jones Internet ETF (FDN - Free Report) , a passively managed exchange traded fund launched on 06/19/2006.

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.

Additionally, sector ETFs offer convenient ways 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 5, placing it in top 31%.

Index Details

The fund is sponsored by First Trust Advisors. It has amassed assets over $6.12 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

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for this ETF are 0.51%, making it on par with most peer products in the space.

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 in the Information Technology sector--about 36.60% of the portfolio. Telecom and Consumer Discretionary round out the top three.

Looking at individual holdings, Meta Platforms Inc. (class A) (META - Free Report) accounts for about 10.62% of total assets, followed by Amazon.com, Inc. (AMZN - Free Report) and Netflix, Inc. (NFLX - Free Report) .

The top 10 holdings account for about 63.64% of total assets under management.

Performance and Risk

The ETF has added about 18.75% and was up about 48.68% so far this year and in the past one year (as of 10/30/2024), respectively. FDN has traded between $152.84 and $221.53 during this last 52-week period.

The ETF has a beta of 1.11 and standard deviation of 30.17% for the trailing three-year period, making it a high risk choice in the space. With about 42 holdings, it has more concentrated exposure than peers.

Alternatives

First Trust Dow Jones Internet ETF holds a Zacks ETF Rank of 1 (Strong 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.

Invesco NASDAQ Internet ETF (PNQI - Free Report) tracks NASDAQ Internet Index and the ARK Next Generation Internet ETF (ARKW - Free Report) tracks N/A. Invesco NASDAQ Internet ETF has $818.28 million in assets, ARK Next Generation Internet ETF has $1.46 billion. PNQI has an expense ratio of 0.60% and ARKW charges 0.87%.

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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