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.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
Because the fund has amassed over $583.21 M, this makes it one of the average sized ETFs in the Broad Developed World ETFs. FGD is managed by First Trust Advisors. 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
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Operating expenses on an annual basis are 0.58% for FGD, making it one of the more expensive products in the space.
It has a 12-month trailing dividend yield of 5.80%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Taking into account individual holdings, Azimut Holding Spa (AZM.IM) accounts for about 1.99% of the fund's total assets, followed by Standard Life Aberdeen Plc (SLA.LN) and Be Semiconductor Industries N.v. (BESI.NA).
FGD's top 10 holdings account for about 16.39% of its total assets under management.
Performance and Risk
The ETF has added roughly 15.47% and is up about 8.16% so far this year and in the past one year (as of 11/27/2019), respectively. FGD has traded between $21.06 and $24.42 during this last 52-week period.
FGD has a beta of 0.80 and standard deviation of 11.48% for the trailing three-year period, which makes the fund a low risk choice in the space. With about 104 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 $11.02 B in assets, Vanguard Total World Stock ETF has $12.47 B. ACWI has an expense ratio of 0.31% and VT charges 0.09%.
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.