The First Trust Dow Jones Global Select Dividend Index Fund (FGD) made its debut on 11/21/2007, and is a smart beta exchange traded fund that provides broad exposure to the Broad Developed World ETFs category of the 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.
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.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
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.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
FGD is managed by First Trust Advisors, and this fund has amassed over $459.34 M, which makes it one of the average sized ETFs in the Broad Developed World ETFs. This particular fund, before fees and expenses, 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
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Annual operating expenses for this ETF are 0.58%, making it one of the more expensive products in the space.
It's 12-month trailing dividend yield comes in at 4.79%.
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.
Taking into account individual holdings, Centurylink, Inc. accounts for about 2.84% of the fund's total assets, followed by Galliford Try Plc (GFRD.LN) and Element Fleet Management Corp. (EFN.CT).
The top 10 holdings account for about 17.35% of total assets under management.
Performance and Risk
The ETF has lost about -6.34% and is down about -3.67% so far this year and in the past one year (as of 10/24/2018), respectively. FGD has traded between $23.80 and $28.07 during this last 52-week period.
The fund has a beta of 0.84 and standard deviation of 13.76% for the trailing three-year period, which makes FGD a low risk choice in this particular 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) tracks MSCI All Country World Index and the Vanguard Total World Stock ETF (VT) tracks FTSE Global All Cap Index. IShares MSCI ACWI ETF has $8.75 B in assets, Vanguard Total World Stock ETF has $11.46 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.