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Is First Trust Dow Jones Global Select Dividend Index Fund (FGD) a Strong ETF Right Now?

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Designed to provide broad exposure to the Broad Developed World ETFs category of the market, the First Trust Dow Jones Global Select Dividend Index Fund (FGD - Free Report) is a smart beta exchange traded fund launched on 11/21/2007.

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

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.

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

The fund is managed by First Trust Advisors, and has been able to amass over $476.28 M, which makes it one of the average sized ETFs in the Broad Developed World ETFs. This particular fund seeks to match the performance of the Dow Jones Global Select Dividend Index before fees and expenses.

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

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 0.58% for this ETF, which makes it one of the more expensive products in the space.

It has a 12-month trailing dividend yield of 5.52%.

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.

When you look at individual holdings, Centurylink, Inc. (CTL - Free Report) accounts for about 1.99% of the fund's total assets, followed by Element Fleet Management Corp. (EFN.CT) and Galliford Try Plc (GFRD.LN).

Its top 10 holdings account for approximately 16.4% of FGD's total assets under management.

Performance and Risk

So far this year, FGD return is roughly 6.54%, and is down about -6.56% in the last one year (as of 02/15/2019). During this past 52-week period, the fund has traded between $21.06 and $26.70.

FGD has a beta of 0.81 and standard deviation of 13.44% for the trailing three-year period, which makes the fund a low risk choice in the space. With about 102 holdings, it effectively diversifies company-specific risk.

Alternatives

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 $10.05 B in assets, Vanguard Total World Stock ETF has $13.48 B. ACWI has an expense ratio of 0.31% 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.

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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