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Is First Trust Large Cap Value AlphaDEX ETF (FTA) a Strong ETF Right Now?
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Making its debut on 05/08/2007, smart beta exchange traded fund First Trust Large Cap Value AlphaDEX ETF (FTA - Free Report) provides investors broad exposure to the Style Box - Large Cap Value category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
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.
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.
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.
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
Because the fund has amassed over $1.18 billion, this makes it one of the average sized ETFs in the Style Box - Large Cap Value. FTA is managed by First Trust Advisors. This particular fund seeks to match the performance of the Nasdaq AlphaDEX Large Cap Value Index before fees and expenses.
The NASDAQ AlphaDEX Large Cap Value Index is an enhanced index which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 500 Large 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.
Operating expenses on an annual basis are 0.59% for FTA, making it one of the most expensive products in the space.
It has a 12-month trailing dividend yield of 1.67%.
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.
FTA's heaviest allocation is in the Financials sector, which is about 23.20% of the portfolio. Its Utilities and Industrials round out the top three.
Taking into account individual holdings, Conocophillips (COP - Free Report) accounts for about 1.26% of the fund's total assets, followed by Eog Resources, Inc. (EOG - Free Report) and Paramount Global (class B) (PARA - Free Report) .
Its top 10 holdings account for approximately 10.72% of FTA's total assets under management.
Performance and Risk
Year-to-date, the First Trust Large Cap Value AlphaDEX ETF has lost about -4.02% so far, and is down about -0.41% over the last 12 months (as of 05/11/2022). FTA has traded between $63.75 and $72.65 in this past 52-week period.
The fund has a beta of 1.13 and standard deviation of 28.38% for the trailing three-year period, which makes FTA a medium risk choice in this particular space. With about 188 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Large Cap Value AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Russell 1000 Value ETF (IWD - Free Report) tracks Russell 1000 Value Index and the Vanguard Value ETF (VTV - Free Report) tracks CRSP U.S. Large Cap Value Index. IShares Russell 1000 Value ETF has $52.45 billion in assets, Vanguard Value ETF has $96.34 billion. IWD has an expense ratio of 0.19% and VTV 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 - Large 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 Large Cap Value AlphaDEX ETF (FTA) a Strong ETF Right Now?
Making its debut on 05/08/2007, smart beta exchange traded fund First Trust Large Cap Value AlphaDEX ETF (FTA - Free Report) provides investors broad exposure to the Style Box - Large Cap Value category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
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.
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.
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.
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
Because the fund has amassed over $1.18 billion, this makes it one of the average sized ETFs in the Style Box - Large Cap Value. FTA is managed by First Trust Advisors. This particular fund seeks to match the performance of the Nasdaq AlphaDEX Large Cap Value Index before fees and expenses.
The NASDAQ AlphaDEX Large Cap Value Index is an enhanced index which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 500 Large 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.
Operating expenses on an annual basis are 0.59% for FTA, making it one of the most expensive products in the space.
It has a 12-month trailing dividend yield of 1.67%.
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.
FTA's heaviest allocation is in the Financials sector, which is about 23.20% of the portfolio. Its Utilities and Industrials round out the top three.
Taking into account individual holdings, Conocophillips (COP - Free Report) accounts for about 1.26% of the fund's total assets, followed by Eog Resources, Inc. (EOG - Free Report) and Paramount Global (class B) (PARA - Free Report) .
Its top 10 holdings account for approximately 10.72% of FTA's total assets under management.
Performance and Risk
Year-to-date, the First Trust Large Cap Value AlphaDEX ETF has lost about -4.02% so far, and is down about -0.41% over the last 12 months (as of 05/11/2022). FTA has traded between $63.75 and $72.65 in this past 52-week period.
The fund has a beta of 1.13 and standard deviation of 28.38% for the trailing three-year period, which makes FTA a medium risk choice in this particular space. With about 188 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Large Cap Value AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Russell 1000 Value ETF (IWD - Free Report) tracks Russell 1000 Value Index and the Vanguard Value ETF (VTV - Free Report) tracks CRSP U.S. Large Cap Value Index. IShares Russell 1000 Value ETF has $52.45 billion in assets, Vanguard Value ETF has $96.34 billion. IWD has an expense ratio of 0.19% and VTV 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 - Large 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.