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Is First Trust Large Cap Core AlphaDEX ETF (FEX) a Strong ETF Right Now?
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The First Trust Large Cap Core AlphaDEX ETF (FEX - Free Report) was launched on 05/08/2007, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - Large Cap Blend category of the market.
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.
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.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
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
The fund is managed by First Trust Advisors, and has been able to amass over $1.24 billion, which makes it one of the larger ETFs in the Style Box - Large Cap Blend. This particular fund seeks to match the performance of the Nasdaq AlphaDEX Large Cap Core Index before fees and expenses.
The NASDAQ AlphaDEX Large Cap Core Index is an enhanced index which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 500 Large Cap Index.
Cost & Other Expenses
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 FEX are 0.59%, which makes it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 0.80%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
FEX's heaviest allocation is in the Information Technology sector, which is about 18.90% of the portfolio. Its Financials and Healthcare round out the top three.
Taking into account individual holdings, Cloudflare, Inc. (class A) (NET - Free Report) accounts for about 0.68% of the fund's total assets, followed by Hubspot, Inc. (HUBS - Free Report) and Pg&e Corporation (PCG - Free Report) .
Its top 10 holdings account for approximately 5.01% of FEX's total assets under management.
Performance and Risk
Year-to-date, the First Trust Large Cap Core AlphaDEX ETF has gained about 28.61% so far, and was up about 27.34% over the last 12 months (as of 12/31/2021). FEX has traded between $72.33 and $92.98 in this past 52-week period.
FEX has a beta of 1.12 and standard deviation of 24.24% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 376 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Large Cap Core AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Core S&P 500 ETF (IVV - Free Report) tracks S&P 500 Index and the SPDR S&P 500 ETF (SPY - Free Report) tracks S&P 500 Index. IShares Core S&P 500 ETF has $335.62 billion in assets, SPDR S&P 500 ETF has $449.74 billion. IVV has an expense ratio of 0.03% and SPY 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 Style Box - Large Cap Blend.
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 Large Cap Core AlphaDEX ETF (FEX) a Strong ETF Right Now?
The First Trust Large Cap Core AlphaDEX ETF (FEX - Free Report) was launched on 05/08/2007, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - Large Cap Blend category of the market.
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.
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.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
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
The fund is managed by First Trust Advisors, and has been able to amass over $1.24 billion, which makes it one of the larger ETFs in the Style Box - Large Cap Blend. This particular fund seeks to match the performance of the Nasdaq AlphaDEX Large Cap Core Index before fees and expenses.
The NASDAQ AlphaDEX Large Cap Core Index is an enhanced index which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 500 Large Cap Index.
Cost & Other Expenses
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 FEX are 0.59%, which makes it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 0.80%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
FEX's heaviest allocation is in the Information Technology sector, which is about 18.90% of the portfolio. Its Financials and Healthcare round out the top three.
Taking into account individual holdings, Cloudflare, Inc. (class A) (NET - Free Report) accounts for about 0.68% of the fund's total assets, followed by Hubspot, Inc. (HUBS - Free Report) and Pg&e Corporation (PCG - Free Report) .
Its top 10 holdings account for approximately 5.01% of FEX's total assets under management.
Performance and Risk
Year-to-date, the First Trust Large Cap Core AlphaDEX ETF has gained about 28.61% so far, and was up about 27.34% over the last 12 months (as of 12/31/2021). FEX has traded between $72.33 and $92.98 in this past 52-week period.
FEX has a beta of 1.12 and standard deviation of 24.24% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 376 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Large Cap Core AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Core S&P 500 ETF (IVV - Free Report) tracks S&P 500 Index and the SPDR S&P 500 ETF (SPY - Free Report) tracks S&P 500 Index. IShares Core S&P 500 ETF has $335.62 billion in assets, SPDR S&P 500 ETF has $449.74 billion. IVV has an expense ratio of 0.03% and SPY 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 Style Box - Large Cap Blend.
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.