If you're interested in broad exposure to the Small Cap Growth segment of the US equity market, look no further than the First Trust Small Cap Growth AlphaDEX ETF (FYC Quick QuoteFYC - Free Report) , a passively managed exchange traded fund launched on April 19, 2011.

The fund is sponsored by First Trust Advisors. It has amassed assets over $848.53 million, making it one of the average sized ETFs attempting to match the Small Cap Growth segment of the US equity market.

Why Small Cap Growth

With more potential comes more risk, and small cap companies, with market capitalization below $2 billion, epitomizes this way of thinking.

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

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 0.7%, making it one of the more expensive products in the space.

It has a 12-month trailing dividend yield of 0.08%.

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 Healthcare sector -- about 22.7% of the portfolio. Industrials and Information Technology round out the top three.

Looking at individual holdings, Applied Optoelectronics, Inc. (AAOI) accounts for about 1.6% of total assets, followed by Fastly, Inc. (class A) (FSLY) and Nlight, Inc. (LASR).

The top 10 holdings account for about 9.83% of total assets under management.

Performance and Risk

FYC seeks to match the performance of the Nasdaq AlphaDEX Small Cap Growth Index before fees and expenses. The NASDAQ AlphaDEX Small Cap Growth Index is an enhanced which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 700 Small Cap Growth Index.

The ETF has lost about 3.36% so far this year and was up about 33.85% in the last one year (as of 03/31/2026). In the past 52-week period, it has traded between $61.01 and $103.77.

The ETF has a beta of 1.14 and standard deviation of 21.32% for the trailing three-year period, making it a high risk choice in the space. With about 265 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust Small Cap Growth AlphaDEX ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, FYC is a good option for those seeking exposure to the Style Box - Small Cap Growth area of the market. Investors might also want to consider some other ETF options in the space.

The iShares Russell 2000 Growth ETF (IWO) and the Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) track a similar index. While iShares Russell 2000 Growth ETF has $11.71 billion in assets, Vanguard Small-Cap Growth Index Fund ETF Shares has $19.24 billion. IWO has an expense ratio of 0.24% and VBK charges 0.05%.

Bottom-Line

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.

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.