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Is First Trust Consumer Staples AlphaDEX ETF (FXG) a Strong ETF Right Now?
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Designed to provide broad exposure to the Consumer Staples ETFs category of the market, the First Trust Consumer Staples AlphaDEX ETF (FXG - Free Report) is a smart beta exchange traded fund launched on 05/08/2007.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
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.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of 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
FXG is managed by First Trust Advisors, and this fund has amassed over $425.42 million, which makes it one of the average sized ETFs in the Consumer Staples ETFs. Before fees and expenses, FXG seeks to match the performance of the StrataQuant Consumer Staples Index.
The StrataQuant Consumer Staples Index is a modified equal-dollar weighted index designed by the AMEX to objectively identify and select stocks from the Russell 1000 Index that may generate positive alpha relative to traditional passive style indices through the use of the AlphaDEX screening methodology.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
With the most expensive product in the space, this ETF has annual operating expenses of 0.63%.
It has a 12-month trailing dividend yield of 1.20%.
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.
For FXG, it has heaviest allocation in the Consumer Staples sector --about 87.40% of the portfolio --while Healthcare and Materials round out the top three.
Looking at individual holdings, Freshpet, Inc. (FRPT - Free Report) accounts for about 4.97% of total assets, followed by Performance Food Group Company (PFGC - Free Report) and Ingredion Incorporated (INGR - Free Report) .
Its top 10 holdings account for approximately 39.76% of FXG's total assets under management.
Performance and Risk
So far this year, FXG has added about 5.52%, and is up roughly 7.08% in the last one year (as of 04/23/2024). During this past 52-week period, the fund has traded between $57.04 and $68.49.
The ETF has a beta of 0.67 and standard deviation of 13.64% for the trailing three-year period, making it a medium risk choice in the space. With about 41 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust Consumer Staples AlphaDEX ETF is a reasonable option for investors seeking to outperform the Consumer Staples ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Consumer Staples ETF (VDC - Free Report) tracks MSCI US Investable Market Consumer Staples 25/50 Index and the Consumer Staples Select Sector SPDR ETF (XLP - Free Report) tracks Consumer Staples Select Sector Index. Vanguard Consumer Staples ETF has $6.50 billion in assets, Consumer Staples Select Sector SPDR ETF has $14.39 billion. VDC has an expense ratio of 0.10% and XLP 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 Consumer Staples 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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Is First Trust Consumer Staples AlphaDEX ETF (FXG) a Strong ETF Right Now?
Designed to provide broad exposure to the Consumer Staples ETFs category of the market, the First Trust Consumer Staples AlphaDEX ETF (FXG - Free Report) is a smart beta exchange traded fund launched on 05/08/2007.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
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.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of 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
FXG is managed by First Trust Advisors, and this fund has amassed over $425.42 million, which makes it one of the average sized ETFs in the Consumer Staples ETFs. Before fees and expenses, FXG seeks to match the performance of the StrataQuant Consumer Staples Index.
The StrataQuant Consumer Staples Index is a modified equal-dollar weighted index designed by the AMEX to objectively identify and select stocks from the Russell 1000 Index that may generate positive alpha relative to traditional passive style indices through the use of the AlphaDEX screening methodology.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
With the most expensive product in the space, this ETF has annual operating expenses of 0.63%.
It has a 12-month trailing dividend yield of 1.20%.
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.
For FXG, it has heaviest allocation in the Consumer Staples sector --about 87.40% of the portfolio --while Healthcare and Materials round out the top three.
Looking at individual holdings, Freshpet, Inc. (FRPT - Free Report) accounts for about 4.97% of total assets, followed by Performance Food Group Company (PFGC - Free Report) and Ingredion Incorporated (INGR - Free Report) .
Its top 10 holdings account for approximately 39.76% of FXG's total assets under management.
Performance and Risk
So far this year, FXG has added about 5.52%, and is up roughly 7.08% in the last one year (as of 04/23/2024). During this past 52-week period, the fund has traded between $57.04 and $68.49.
The ETF has a beta of 0.67 and standard deviation of 13.64% for the trailing three-year period, making it a medium risk choice in the space. With about 41 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust Consumer Staples AlphaDEX ETF is a reasonable option for investors seeking to outperform the Consumer Staples ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Consumer Staples ETF (VDC - Free Report) tracks MSCI US Investable Market Consumer Staples 25/50 Index and the Consumer Staples Select Sector SPDR ETF (XLP - Free Report) tracks Consumer Staples Select Sector Index. Vanguard Consumer Staples ETF has $6.50 billion in assets, Consumer Staples Select Sector SPDR ETF has $14.39 billion. VDC has an expense ratio of 0.10% and XLP 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 Consumer Staples 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.