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Is First Trust Consumer Discretionary AlphaDEX ETF (FXD) a Strong ETF Right Now?
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Designed to provide broad exposure to the Consumer Discretionary ETFs category of the market, the First Trust Consumer Discretionary AlphaDEX ETF (FXD - Free Report) is a smart beta exchange traded fund launched on 05/08/2007.
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.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix 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
FXD is managed by First Trust Advisors, and this fund has amassed over $1.51 billion, which makes it one of the largest ETFs in the Consumer Discretionary ETFs. Before fees and expenses, this particular fund seeks to match the performance of the StrataQuant Consumer Discretionary Index.
The StrataQuant Consumer Discretionary Index employs the AlphaDEX stock selection methodology to select stocks from the Russell 1000 Index.
Cost & Other Expenses
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.61%.
FXD's 12-month trailing dividend yield is 0.84%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Consumer Discretionary sector - about 77.30% of the portfolio. Telecom and Industrials round out the top three.
Looking at individual holdings, Carvana Co. (class A) (CVNA - Free Report) accounts for about 1.80% of total assets, followed by D.r. Horton, Inc. (DHI - Free Report) and Toll Brothers, Inc. (TOL - Free Report) .
The top 10 holdings account for about 16.9% of total assets under management.
Performance and Risk
The ETF return is roughly 7.89% and was up about 25.38% so far this year and in the past one year (as of 11/06/2024), respectively. FXD has traded between $49.45 and $64.54 during this last 52-week period.
FXD has a beta of 1.38 and standard deviation of 23.31% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 120 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 $5.94 billion in assets, Consumer Discretionary Select Sector SPDR ETF has $20.57 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.
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Is First Trust Consumer Discretionary AlphaDEX ETF (FXD) a Strong ETF Right Now?
Designed to provide broad exposure to the Consumer Discretionary ETFs category of the market, the First Trust Consumer Discretionary AlphaDEX ETF (FXD - Free Report) is a smart beta exchange traded fund launched on 05/08/2007.
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.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix 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
FXD is managed by First Trust Advisors, and this fund has amassed over $1.51 billion, which makes it one of the largest ETFs in the Consumer Discretionary ETFs. Before fees and expenses, this particular fund seeks to match the performance of the StrataQuant Consumer Discretionary Index.
The StrataQuant Consumer Discretionary Index employs the AlphaDEX stock selection methodology to select stocks from the Russell 1000 Index.
Cost & Other Expenses
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.61%.
FXD's 12-month trailing dividend yield is 0.84%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Consumer Discretionary sector - about 77.30% of the portfolio. Telecom and Industrials round out the top three.
Looking at individual holdings, Carvana Co. (class A) (CVNA - Free Report) accounts for about 1.80% of total assets, followed by D.r. Horton, Inc. (DHI - Free Report) and Toll Brothers, Inc. (TOL - Free Report) .
The top 10 holdings account for about 16.9% of total assets under management.
Performance and Risk
The ETF return is roughly 7.89% and was up about 25.38% so far this year and in the past one year (as of 11/06/2024), respectively. FXD has traded between $49.45 and $64.54 during this last 52-week period.
FXD has a beta of 1.38 and standard deviation of 23.31% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 120 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 $5.94 billion in assets, Consumer Discretionary Select Sector SPDR ETF has $20.57 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.