Launched on 05/08/2007, the First Trust Consumer Discretionary AlphaDEX Fund (FXD) is a passively managed exchange traded fund designed to provide a broad exposure to the Consumer Discretionary - Broad segment of the equity market.
While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.
Additionally, sector ETFs offer convenient ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Consumer Discretionary - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 14, placing it in bottom 13%.
The fund is sponsored by First Trust Advisors. It has amassed assets over $380.46 M, making it one of the larger ETFs attempting to match the performance of the Consumer Discretionary - Broad segment of the equity market. FXD seeks to match the performance of the StrataQuant Consumer Discretionary Index before fees and expenses.
The StrataQuant Consumer Discretionary Index employs the AlphaDEX stock selection methodology to select stocks from the Russell 1000 Index.
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 counterparts, other things remaining the same.
Annual operating expenses for this ETF are 0.64%, making it one of the more expensive products in the space.
It has a 12-month trailing dividend yield of 0.74%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Consumer Discretionary sector--about 80.50% of the portfolio. Telecom and Industrials round out the top three.
Looking at individual holdings, Mohawk Industries, Inc. (MHK) accounts for about 1.78% of total assets, followed by Pultegroup, Inc. (PHM) and Borgwarner Inc. (
BWA Quick Quote BWA - Free Report) .
The top 10 holdings account for about 16.61% of total assets under management.
Performance and Risk
So far this year, FXD has gained about 16.96%, and is down about -0.09% in the last one year (as of 07/10/2019). During this past 52-week period, the fund has traded between $34.86 and $44.45.
The ETF has a beta of 1.03 and standard deviation of 13.97% for the trailing three-year period, making it a medium risk choice in the space. With about 110 holdings, it effectively diversifies company-specific risk.
First Trust Consumer Discretionary AlphaDEX Fund holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, FXD is a great option for investors seeking exposure to the Consumer Discretionary ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.
Vanguard Consumer Discretionary ETF (VCR) tracks MSCI US Investable Market Consumer Discretionary 25/50 Index and the Consumer Discretionary Select Sector SPDR Fund (XLY) tracks Consumer Discretionary Select Sector Index. Vanguard Consumer Discretionary ETF has $3.15 B in assets, Consumer Discretionary Select Sector SPDR Fund has $13.97 B. VCR has an expense ratio of 0.10% and XLY charges 0.13%.
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