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Should You Invest in the First Trust Indxx NextG ETF (NXTG)?

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Looking for broad exposure to the Technology - Telecom segment of the equity market? You should consider the First Trust Indxx NextG ETF (NXTG - Free Report) , a passively managed exchange traded fund launched on 02/17/2011.

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

Sector ETFs also provide investors access to a broad group of companies in particular sectors that offer low risk and diversified exposure. Technology - Telecom is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 9, placing it in bottom 44%.

Index Details

The fund is sponsored by First Trust Advisors. It has amassed assets over $373 million, making it one of the average sized ETFs attempting to match the performance of the Technology - Telecom segment of the equity market. NXTG seeks to match the performance of the INDXX 5G & NEXTG THEMATIC INDEX before fees and expenses.

The Indxx 5G & NextG Thematic Index tracks the performance of companies engaged in the smartphone segment of the telecom and technology sectors.

Costs

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.

Annual operating expenses for this ETF are 0.70%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 2.12%.

Sector Exposure and Top Holdings

ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

Looking at individual holdings, Nvidia Corporation (NVDA - Free Report) accounts for about 2.22% of total assets, followed by Advanced Micro Devices, Inc. (AMD - Free Report) and Taiwan Semiconductor Manufacturing Company Ltd. (adr) (TSM - Free Report) .

The top 10 holdings account for about 16.22% of total assets under management.

Performance and Risk

Year-to-date, the First Trust Indxx NextG ETF has added roughly 1.45% so far, and is up about 18.79% over the last 12 months (as of 05/14/2024). NXTG has traded between $64.60 and $80.75 in this past 52-week period.

The ETF has a beta of 0.88 and standard deviation of 17.17% for the trailing three-year period. With about 111 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust Indxx NextG ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, NXTG is a reasonable option for those seeking exposure to the Technology ETFs area of the market. Investors might also want to consider some other ETF options in the space.

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