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Is First Trust Multi Cap Growth AlphaDEX Fund (FAD) a Hot ETF Right Now?
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The First Trust Multi Cap Growth AlphaDEX Fund (FAD - Free Report) made its debut on 05/08/2007, and is a smart beta exchange traded fund that provides broad exposure to the Total Market (U.S.) ETFs category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
FAD is managed by First Trust Advisors, and this fund has amassed over $219.14 M, which makes it one of the average sized ETFs in the Total Market (U.S.) ETFs. Before fees and expenses, this particular fund seeks to match the performance of the Nasdaq AlphaDEX Multi Cap Growth Index.
The NASDAQ AlphaDEX Multi Cap Growth Index is an enhanced which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 500 Large Cap Index, NASDAQ US 600 Mid Cap Index and NASDAQ US 700 Small Cap Index.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
With one of the more expensive products in the space, this ETF has annual operating expenses of 0.70%.
FAD's 12-month trailing dividend yield is 0.20%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 30.30% of the portfolio, the fund has heaviest allocation to the Information Technology sector; Healthcare and Industrials round out the top three.
When you look at individual holdings, Advanced Micro Devices, Inc. (AMD - Free Report) accounts for about 0.77% of the fund's total assets, followed by Square, Inc. (class A) (SQ - Free Report) and Illumina, Inc. (ILMN - Free Report) .
Its top 10 holdings account for approximately 5.33% of FAD's total assets under management.
Performance and Risk
The ETF has added about 17.22% so far this year and is up about 26.96% in the last one year (as of 09/21/2018). In the past 52-week period, it has traded between $60.21 and $77.58.
The ETF has a beta of 0.97 and standard deviation of 13.54% for the trailing three-year period, making it a medium choice in the space. With about 675 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Multi Cap Growth AlphaDEX Fund is a reasonable option for investors seeking to outperform the Total Market (U.S.) ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
First Trust US Equity Opportunities ETF (FPX - Free Report) tracks IPOX-100 U.S. Index and the iShares Core S&P U.S. Growth ETF (IUSG - Free Report) tracks S&P 900 Growth Index. First Trust US Equity Opportunities ETF has $1.22 B in assets, iShares Core S&P U.S. Growth ETF has $5.36 B. FPX has an expense ratio of 0.59% and IUSG charges 0.04%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Total Market (U.S.) 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 Multi Cap Growth AlphaDEX Fund (FAD) a Hot ETF Right Now?
The First Trust Multi Cap Growth AlphaDEX Fund (FAD - Free Report) made its debut on 05/08/2007, and is a smart beta exchange traded fund that provides broad exposure to the Total Market (U.S.) ETFs category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
FAD is managed by First Trust Advisors, and this fund has amassed over $219.14 M, which makes it one of the average sized ETFs in the Total Market (U.S.) ETFs. Before fees and expenses, this particular fund seeks to match the performance of the Nasdaq AlphaDEX Multi Cap Growth Index.
The NASDAQ AlphaDEX Multi Cap Growth Index is an enhanced which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 500 Large Cap Index, NASDAQ US 600 Mid Cap Index and NASDAQ US 700 Small Cap Index.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
With one of the more expensive products in the space, this ETF has annual operating expenses of 0.70%.
FAD's 12-month trailing dividend yield is 0.20%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 30.30% of the portfolio, the fund has heaviest allocation to the Information Technology sector; Healthcare and Industrials round out the top three.
When you look at individual holdings, Advanced Micro Devices, Inc. (AMD - Free Report) accounts for about 0.77% of the fund's total assets, followed by Square, Inc. (class A) (SQ - Free Report) and Illumina, Inc. (ILMN - Free Report) .
Its top 10 holdings account for approximately 5.33% of FAD's total assets under management.
Performance and Risk
The ETF has added about 17.22% so far this year and is up about 26.96% in the last one year (as of 09/21/2018). In the past 52-week period, it has traded between $60.21 and $77.58.
The ETF has a beta of 0.97 and standard deviation of 13.54% for the trailing three-year period, making it a medium choice in the space. With about 675 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Multi Cap Growth AlphaDEX Fund is a reasonable option for investors seeking to outperform the Total Market (U.S.) ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
First Trust US Equity Opportunities ETF (FPX - Free Report) tracks IPOX-100 U.S. Index and the iShares Core S&P U.S. Growth ETF (IUSG - Free Report) tracks S&P 900 Growth Index. First Trust US Equity Opportunities ETF has $1.22 B in assets, iShares Core S&P U.S. Growth ETF has $5.36 B. FPX has an expense ratio of 0.59% and IUSG charges 0.04%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Total Market (U.S.) 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.