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Is First Trust Multi Cap Growth AlphaDEX ETF (FAD) a Strong ETF Right Now?
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The First Trust Multi Cap Growth AlphaDEX ETF (FAD - Free Report) made its debut on 05/08/2007, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - All Cap Growth category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option 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.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
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
Managed by First Trust Advisors, FAD has amassed assets over $214.27 million, making it one of the average sized ETFs in the Style Box - All Cap Growth. This particular fund seeks to match the performance of the Nasdaq AlphaDEX Multi Cap Growth Index before fees and expenses.
The NASDAQ AlphaDEX Multi Cap Growth Index is an enhanced which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 500 Large Cap Index, NASDAQ US 600 Mid Cap Index and NASDAQ US 700 Small Cap Index.
Cost & Other Expenses
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
With one of the more expensive products in the space, this ETF has annual operating expenses of 0.63%.
It has a 12-month trailing dividend yield of 0.30%.
Sector Exposure
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
For FAD, it has heaviest allocation in the Information Technology sector --about 32.70% of the portfolio --while Healthcare and Consumer Discretionary round out the top three.
Taking into account individual holdings, Moderna (MRNA) accounts for about 0% of the fund's total assets, followed by. 63 ( Inc.) and Applied Materials (AMAT).
FAD's top 10 holdings account for about 5.47% of its total assets under management.
Performance and Risk
The ETF has added roughly 7.90% so far this year and it's up approximately 88.98% in the last one year (as of 03/15/2021). In the past 52-week period, it has traded between $52.24 and $118.03.
FAD has a beta of 1.12 and standard deviation of 26% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 675 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Multi Cap Growth AlphaDEX ETF is an excellent option for investors seeking to outperform the Style Box - All Cap Growth segment of the market. There are other ETFs in the space which investors could consider as well.
First Trust US Equity Opportunities ETF (FPX - Free Report) tracks IPOX-100 U.S. Index and the iShares Core S&P U.S. Growth ETF (IUSG - Free Report) tracks S&P 900 Growth Index. First Trust US Equity Opportunities ETF has $2.10 billion in assets, iShares Core S&P U.S. Growth ETF has $10.35 billion. FPX has an expense ratio of 0.70% and IUSG charges 0.04%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - All Cap Growth.
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 Multi Cap Growth AlphaDEX ETF (FAD) a Strong ETF Right Now?
The First Trust Multi Cap Growth AlphaDEX ETF (FAD - Free Report) made its debut on 05/08/2007, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - All Cap Growth category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option 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.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
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
Managed by First Trust Advisors, FAD has amassed assets over $214.27 million, making it one of the average sized ETFs in the Style Box - All Cap Growth. This particular fund seeks to match the performance of the Nasdaq AlphaDEX Multi Cap Growth Index before fees and expenses.
The NASDAQ AlphaDEX Multi Cap Growth Index is an enhanced which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 500 Large Cap Index, NASDAQ US 600 Mid Cap Index and NASDAQ US 700 Small Cap Index.
Cost & Other Expenses
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
With one of the more expensive products in the space, this ETF has annual operating expenses of 0.63%.
It has a 12-month trailing dividend yield of 0.30%.
Sector Exposure
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
For FAD, it has heaviest allocation in the Information Technology sector --about 32.70% of the portfolio --while Healthcare and Consumer Discretionary round out the top three.
Taking into account individual holdings, Moderna (MRNA) accounts for about 0% of the fund's total assets, followed by. 63 ( Inc.) and Applied Materials (AMAT).
FAD's top 10 holdings account for about 5.47% of its total assets under management.
Performance and Risk
The ETF has added roughly 7.90% so far this year and it's up approximately 88.98% in the last one year (as of 03/15/2021). In the past 52-week period, it has traded between $52.24 and $118.03.
FAD has a beta of 1.12 and standard deviation of 26% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 675 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Multi Cap Growth AlphaDEX ETF is an excellent option for investors seeking to outperform the Style Box - All Cap Growth segment of the market. There are other ETFs in the space which investors could consider as well.
First Trust US Equity Opportunities ETF (FPX - Free Report) tracks IPOX-100 U.S. Index and the iShares Core S&P U.S. Growth ETF (IUSG - Free Report) tracks S&P 900 Growth Index. First Trust US Equity Opportunities ETF has $2.10 billion in assets, iShares Core S&P U.S. Growth ETF has $10.35 billion. FPX has an expense ratio of 0.70% and IUSG charges 0.04%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - All Cap Growth.
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.