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Is Fidelity Dividend ETF for Rising Rates (FDRR) a Hot ETF Right Now?

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Making its debut on 09/12/2016, smart beta exchange traded fund Fidelity Dividend ETF for Rising Rates (FDRR - Free Report) provides investors broad exposure to the Total Market (U.S.) ETFs category of the U.S. equity 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.

A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.

There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.

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.

The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.

Fund Sponsor & Index

FDRR is managed by Fidelity, and this fund has amassed over $293.27 M, which makes it one of the larger ETFs in the Total Market (U.S.) ETFs. This particular fund seeks to match the performance of the Fidelity Dividend Index for Rising Rates before fees and expenses.

The Fidelity Dividend Index for Rising Rates reflects the performance of stocks of large and mid-capitalization dividend-paying companies that are expected to continue to pay and grow their dividends and have a positive correlation of returns to increasing 10-year U.S. Treasury yields.

Cost & Other Expenses

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.

Operating expenses on an annual basis are 0.29% for FDRR, making it on par with most peer products in the space.

FDRR's 12-month trailing dividend yield is 2.95%.

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.

Looking at individual holdings, Apple Inc (AAPL - Free Report) accounts for about 4.85% of total assets, followed by Microsoft Corp (MSFT - Free Report) and Johnson + Johnson (JNJ - Free Report) .

Its top 10 holdings account for approximately 25.32% of FDRR's total assets under management.

Performance and Risk

So far this year, the ETF has added roughly 0.90%, and was up about 13.31% in the last one year (as of 05/23/2018). FDRR has traded between $28.03 and $32.66 in the past 52-week period.

The ETF has a beta of 0.96 and standard deviation of 11.88% for the trailing three-year period. With about 123 holdings, it effectively diversifies company-specific risk.

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.