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Should First Trust Small Cap Growth AlphaDEX ETF (FYC) Be on Your Investing Radar?
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Looking for broad exposure to the Small Cap Growth segment of the US equity market? You should consider the First Trust Small Cap Growth AlphaDEX ETF (FYC - Free Report) , a passively managed exchange traded fund launched on 04/19/2011.
The fund is sponsored by First Trust Advisors. It has amassed assets over $386.64 million, making it one of the average sized ETFs attempting to match the Small Cap Growth segment of the US equity market.
Why Small Cap Growth
With more potential comes more risk, and small cap companies, with market capitalization below $2 billion, epitomizes this way of thinking.
While growth stocks do boast higher than average sales and earnings growth rates, and they are expected to grow faster than the wider market, investors should note these kinds of stocks have higher valuations. Something to keep in mind is the higher level of volatility that is affiliated with growth stocks. Even though growth stocks are more likely to outperform their value counterparts in strong bull markets, value stocks have a record of delivering better returns in almost all markets than growth stocks.
Costs
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Annual operating expenses for this ETF are 0.71%, making it one of the more expensive products in the space.
It has a 12-month trailing dividend yield of 0.10%.
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.
This ETF has heaviest allocation to the Healthcare sector--about 19.60% of the portfolio. Information Technology and Consumer Discretionary round out the top three.
Looking at individual holdings, Surgery Partners, Inc. (SGRY - Free Report) accounts for about 0.92% of total assets, followed by Matador Resources Company (MTDR - Free Report) and Overstock.com, Inc. .
The top 10 holdings account for about 8.13% of total assets under management.
Performance and Risk
FYC seeks to match the performance of the Nasdaq AlphaDEX Small Cap Growth Index before fees and expenses. The NASDAQ AlphaDEX Small Cap Growth Index is an enhanced which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 700 Small Cap Growth Index.
The ETF has added about 18.28% so far this year and is up about 53.11% in the last one year (as of 08/11/2021). In the past 52-week period, it has traded between $44.94 and $75.91.
The ETF has a beta of 1.27 and standard deviation of 30.54% for the trailing three-year period, making it a high risk choice in the space. With about 263 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Small Cap Growth AlphaDEX 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, FYC is a reasonable option for those seeking exposure to the Style Box - Small Cap Growth area of the market. Investors might also want to consider some other ETF options in the space.
The iShares Russell 2000 Growth ETF (IWO - Free Report) and the Vanguard SmallCap Growth ETF (VBK - Free Report) track a similar index. While iShares Russell 2000 Growth ETF has $11.96 billion in assets, Vanguard SmallCap Growth ETF has $15.85 billion. IWO has an expense ratio of 0.24% and VBK charges 0.07%.
Bottom-Line
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.
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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Should First Trust Small Cap Growth AlphaDEX ETF (FYC) Be on Your Investing Radar?
Looking for broad exposure to the Small Cap Growth segment of the US equity market? You should consider the First Trust Small Cap Growth AlphaDEX ETF (FYC - Free Report) , a passively managed exchange traded fund launched on 04/19/2011.
The fund is sponsored by First Trust Advisors. It has amassed assets over $386.64 million, making it one of the average sized ETFs attempting to match the Small Cap Growth segment of the US equity market.
Why Small Cap Growth
With more potential comes more risk, and small cap companies, with market capitalization below $2 billion, epitomizes this way of thinking.
While growth stocks do boast higher than average sales and earnings growth rates, and they are expected to grow faster than the wider market, investors should note these kinds of stocks have higher valuations. Something to keep in mind is the higher level of volatility that is affiliated with growth stocks. Even though growth stocks are more likely to outperform their value counterparts in strong bull markets, value stocks have a record of delivering better returns in almost all markets than growth stocks.
Costs
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Annual operating expenses for this ETF are 0.71%, making it one of the more expensive products in the space.
It has a 12-month trailing dividend yield of 0.10%.
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.
This ETF has heaviest allocation to the Healthcare sector--about 19.60% of the portfolio. Information Technology and Consumer Discretionary round out the top three.
Looking at individual holdings, Surgery Partners, Inc. (SGRY - Free Report) accounts for about 0.92% of total assets, followed by Matador Resources Company (MTDR - Free Report) and Overstock.com, Inc. .
The top 10 holdings account for about 8.13% of total assets under management.
Performance and Risk
FYC seeks to match the performance of the Nasdaq AlphaDEX Small Cap Growth Index before fees and expenses. The NASDAQ AlphaDEX Small Cap Growth Index is an enhanced which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 700 Small Cap Growth Index.
The ETF has added about 18.28% so far this year and is up about 53.11% in the last one year (as of 08/11/2021). In the past 52-week period, it has traded between $44.94 and $75.91.
The ETF has a beta of 1.27 and standard deviation of 30.54% for the trailing three-year period, making it a high risk choice in the space. With about 263 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Small Cap Growth AlphaDEX 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, FYC is a reasonable option for those seeking exposure to the Style Box - Small Cap Growth area of the market. Investors might also want to consider some other ETF options in the space.
The iShares Russell 2000 Growth ETF (IWO - Free Report) and the Vanguard SmallCap Growth ETF (VBK - Free Report) track a similar index. While iShares Russell 2000 Growth ETF has $11.96 billion in assets, Vanguard SmallCap Growth ETF has $15.85 billion. IWO has an expense ratio of 0.24% and VBK charges 0.07%.
Bottom-Line
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.
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.