Launched on 11/21/2007, the First Trust Dow Jones Global Select Dividend Index Fund (FGD - Free Report) is a smart beta exchange traded fund offering broad exposure to the Broad Developed World ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
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.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
The fund is sponsored by First Trust Advisors. It has amassed assets over $487.41 M, making it one of the average sized ETFs in the Broad Developed World ETFs. Before fees and expenses, this particular fund seeks to match the performance of the Dow Jones Global Select Dividend Index.
This Index is an indicated annual dividend yield weighted index of 100 stocks selected from the developed-market portion of the Dow Jones World Index.
Cost & Other Expenses
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
With one of the more expensive products in the space, this ETF has annual operating expenses of 0.58%.
It has a 12-month trailing dividend yield of 4.50%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
Taking into account individual holdings, Centurylink, Inc. (CTL - Free Report) accounts for about 2.92% of the fund's total assets, followed by Galliford Try Plc (GFRD.LN) and Gamestop Corp. (class A) (GME - Free Report) .
Its top 10 holdings account for approximately 17.27% of FGD's total assets under management.
Performance and Risk
The ETF has lost about -0.57% and is up roughly 3.40% so far this year and in the past one year (as of 09/28/2018), respectively. FGD has traded between $24.54 and $28.07 during this last 52-week period.
The ETF has a beta of 0.87 and standard deviation of 13.91% for the trailing three-year period, making it a low choice in the space. With about 101 holdings, it effectively diversifies company-specific risk.
First Trust Dow Jones Global Select Dividend Index Fund is a reasonable option for investors seeking to outperform the Broad Developed World ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
IShares MSCI ACWI ETF (ACWI - Free Report) tracks MSCI All Country World Index and the Vanguard Total World Stock ETF (VT - Free Report) tracks FTSE Global All Cap Index. IShares MSCI ACWI ETF has $8.96 B in assets, Vanguard Total World Stock ETF has $12.08 B. ACWI has an expense ratio of 0.32% and VT charges 0.10%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Broad Developed World ETFs.
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.