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Is First Trust Mid Cap Value AlphaDEX ETF (FNK) a Strong ETF Right Now?
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Launched on 04/19/2011, the First Trust Mid Cap Value AlphaDEX ETF (FNK - Free Report) is a smart beta exchange traded fund offering broad exposure to the Style Box - Mid Cap Value category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
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.
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.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
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
FNK is managed by First Trust Advisors, and this fund has amassed over $241.84 million, which makes it one of the smaller ETFs in the Style Box - Mid Cap Value. This particular fund, before fees and expenses, seeks to match the performance of the Nasdaq AlphaDEX Mid Cap Value Index.
The NASDAQ AlphaDEX Mid Cap Value Index is an enhanced index which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 600 Mid Cap Value 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 FNK are 0.70%, which makes it one of the most expensive products in the space.
The fund has a 12-month trailing dividend yield of 1.45%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
FNK's heaviest allocation is in the Financials sector, which is about 28% of the portfolio. Its Industrials and Consumer Discretionary round out the top three.
Taking into account individual holdings, The Mosaic Company (MOS - Free Report) accounts for about 0.94% of the fund's total assets, followed by Discovery, Inc. (class A) and Huntsman Corporation (HUN - Free Report) .
The top 10 holdings account for about 8.66% of total assets under management.
Performance and Risk
The ETF has lost about -0.43% and is up roughly 10.69% so far this year and in the past one year (as of 03/31/2022), respectively. FNK has traded between $42.51 and $48.46 during this last 52-week period.
FNK has a beta of 1.36 and standard deviation of 32.58% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 226 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Mid Cap Value AlphaDEX ETF is an excellent option for investors seeking to outperform the Style Box - Mid Cap Value segment of the market. There are other ETFs in the space which investors could consider as well.
IShares Russell MidCap Value ETF (IWS - Free Report) tracks Russell MidCap Value Index and the Vanguard MidCap Value ETF (VOE - Free Report) tracks CRSP U.S. Mid Cap Value Index. IShares Russell MidCap Value ETF has $15.10 billion in assets, Vanguard MidCap Value ETF has $17.05 billion. IWS has an expense ratio of 0.23% and VOE charges 0.07%.
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 - Mid Cap Value.
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 Mid Cap Value AlphaDEX ETF (FNK) a Strong ETF Right Now?
Launched on 04/19/2011, the First Trust Mid Cap Value AlphaDEX ETF (FNK - Free Report) is a smart beta exchange traded fund offering broad exposure to the Style Box - Mid Cap Value category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
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.
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.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
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
FNK is managed by First Trust Advisors, and this fund has amassed over $241.84 million, which makes it one of the smaller ETFs in the Style Box - Mid Cap Value. This particular fund, before fees and expenses, seeks to match the performance of the Nasdaq AlphaDEX Mid Cap Value Index.
The NASDAQ AlphaDEX Mid Cap Value Index is an enhanced index which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 600 Mid Cap Value 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 FNK are 0.70%, which makes it one of the most expensive products in the space.
The fund has a 12-month trailing dividend yield of 1.45%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
FNK's heaviest allocation is in the Financials sector, which is about 28% of the portfolio. Its Industrials and Consumer Discretionary round out the top three.
Taking into account individual holdings, The Mosaic Company (MOS - Free Report) accounts for about 0.94% of the fund's total assets, followed by Discovery, Inc. (class A) and Huntsman Corporation (HUN - Free Report) .
The top 10 holdings account for about 8.66% of total assets under management.
Performance and Risk
The ETF has lost about -0.43% and is up roughly 10.69% so far this year and in the past one year (as of 03/31/2022), respectively. FNK has traded between $42.51 and $48.46 during this last 52-week period.
FNK has a beta of 1.36 and standard deviation of 32.58% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 226 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Mid Cap Value AlphaDEX ETF is an excellent option for investors seeking to outperform the Style Box - Mid Cap Value segment of the market. There are other ETFs in the space which investors could consider as well.
IShares Russell MidCap Value ETF (IWS - Free Report) tracks Russell MidCap Value Index and the Vanguard MidCap Value ETF (VOE - Free Report) tracks CRSP U.S. Mid Cap Value Index. IShares Russell MidCap Value ETF has $15.10 billion in assets, Vanguard MidCap Value ETF has $17.05 billion. IWS has an expense ratio of 0.23% and VOE charges 0.07%.
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 - Mid Cap Value.
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.