Launched on 05/08/2007, the First Trust Consumer Discretionary AlphaDEX Fund (FXD - Free Report) is a passively managed exchange traded fund designed to provide a broad exposure to the Consumer Discretionary - Broad segment of the equity market.
An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.
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 11, placing it in bottom 31%.
The fund is sponsored by First Trust Advisors. It has amassed assets over $358.46 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 1%.
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.
This ETF has heaviest allocation in the Consumer Discretionary sector--about 77.30% of the portfolio. Telecom and Consumer Staples round out the top three.
Looking at individual holdings, Roku, Inc. (ROKU - Free Report) accounts for about 2.02% of total assets, followed by Carvana Co. (CVNA - Free Report) and Borgwarner Inc. (BWA - Free Report) .
The top 10 holdings account for about 16.06% of total assets under management.
Performance and Risk
The ETF has added about 18.81% so far this year and is up about 10.74% in the last one year (as of 11/22/2019). In that past 52-week period, it has traded between $34.86 and $44.50.
The ETF has a beta of 1.03 and standard deviation of 14.58% for the trailing three-year period, making it a medium risk choice in the space. With about 120 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 an outstanding 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 - Free Report) tracks MSCI US Investable Market Consumer Discretionary 25/50 Index and the Consumer Discretionary Select Sector SPDR Fund (XLY - Free Report) tracks Consumer Discretionary Select Sector Index. Vanguard Consumer Discretionary ETF has $2.97 B in assets, Consumer Discretionary Select Sector SPDR Fund has $14.72 B. VCR has an expense ratio of 0.10% and XLY charges 0.13%.
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