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Is First Trust Consumer Discretionary AlphaDEX ETF (FXD) a Strong ETF Right Now?
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The First Trust Consumer Discretionary AlphaDEX ETF (FXD - Free Report) was launched on 05/08/2007, and is a smart beta exchange traded fund designed to offer broad exposure to the Consumer Discretionary ETFs 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 work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
FXD is managed by First Trust Advisors, and this fund has amassed over $2.02 billion, which makes it one of the largest ETFs in the Consumer Discretionary ETFs. This particular fund, before fees and expenses, seeks to match the performance of the StrataQuant Consumer Discretionary Index.
The StrataQuant Consumer Discretionary Index employs the AlphaDEX stock selection methodology to select stocks from the Russell 1000 Index.
Cost & Other Expenses
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Annual operating expenses for this ETF are 0.63%, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 0.42%.
Sector Exposure and Top Holdings
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.
FXD's heaviest allocation is in the Consumer Discretionary sector, which is about 82.40% of the portfolio. Its Telecom and Industrials round out the top three.
Taking into account individual holdings, Toll Brothers, Inc. (TOL - Free Report) accounts for about 1.44% of the fund's total assets, followed by General Motors Company (GM - Free Report) and Pultegroup, Inc. (PHM - Free Report) .
Its top 10 holdings account for approximately 14.11% of FXD's total assets under management.
Performance and Risk
Year-to-date, the First Trust Consumer Discretionary AlphaDEX ETF has added about 29.39% so far, and was up about 41.77% over the last 12 months (as of 11/08/2021). FXD has traded between $44.86 and $64.42 in this past 52-week period.
FXD has a beta of 1.40 and standard deviation of 29.97% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 122 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Consumer Discretionary AlphaDEX ETF is a reasonable option for investors seeking to outperform the Consumer Discretionary ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Consumer Discretionary ETF (VCR - Free Report) tracks MSCI US Investable Market Consumer Discretionary 25/50 Index and the Consumer Discretionary Select Sector SPDR ETF (XLY - Free Report) tracks Consumer Discretionary Select Sector Index. Vanguard Consumer Discretionary ETF has $7.44 billion in assets, Consumer Discretionary Select Sector SPDR ETF has $23.64 billion. VCR has an expense ratio of 0.10% and XLY charges 0.12%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Consumer Discretionary 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 Discretionary AlphaDEX ETF (FXD) a Strong ETF Right Now?
The First Trust Consumer Discretionary AlphaDEX ETF (FXD - Free Report) was launched on 05/08/2007, and is a smart beta exchange traded fund designed to offer broad exposure to the Consumer Discretionary ETFs 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 work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
FXD is managed by First Trust Advisors, and this fund has amassed over $2.02 billion, which makes it one of the largest ETFs in the Consumer Discretionary ETFs. This particular fund, before fees and expenses, seeks to match the performance of the StrataQuant Consumer Discretionary Index.
The StrataQuant Consumer Discretionary Index employs the AlphaDEX stock selection methodology to select stocks from the Russell 1000 Index.
Cost & Other Expenses
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Annual operating expenses for this ETF are 0.63%, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 0.42%.
Sector Exposure and Top Holdings
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.
FXD's heaviest allocation is in the Consumer Discretionary sector, which is about 82.40% of the portfolio. Its Telecom and Industrials round out the top three.
Taking into account individual holdings, Toll Brothers, Inc. (TOL - Free Report) accounts for about 1.44% of the fund's total assets, followed by General Motors Company (GM - Free Report) and Pultegroup, Inc. (PHM - Free Report) .
Its top 10 holdings account for approximately 14.11% of FXD's total assets under management.
Performance and Risk
Year-to-date, the First Trust Consumer Discretionary AlphaDEX ETF has added about 29.39% so far, and was up about 41.77% over the last 12 months (as of 11/08/2021). FXD has traded between $44.86 and $64.42 in this past 52-week period.
FXD has a beta of 1.40 and standard deviation of 29.97% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 122 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Consumer Discretionary AlphaDEX ETF is a reasonable option for investors seeking to outperform the Consumer Discretionary ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Consumer Discretionary ETF (VCR - Free Report) tracks MSCI US Investable Market Consumer Discretionary 25/50 Index and the Consumer Discretionary Select Sector SPDR ETF (XLY - Free Report) tracks Consumer Discretionary Select Sector Index. Vanguard Consumer Discretionary ETF has $7.44 billion in assets, Consumer Discretionary Select Sector SPDR ETF has $23.64 billion. VCR has an expense ratio of 0.10% and XLY charges 0.12%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Consumer Discretionary 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.