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Is First Trust Mid Cap Value AlphaDEX ETF (FNK) a Strong ETF Right Now?
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Designed to provide broad exposure to the Style Box - Mid Cap Value category of the market, the First Trust Mid Cap Value AlphaDEX ETF (FNK - Free Report) is a smart beta exchange traded fund launched on 04/19/2011.
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.
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.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
FNK is managed by First Trust Advisors, and this fund has amassed over $239.04 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
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Operating expenses on an annual basis are 0.70% for this ETF, which makes it one of the most expensive products in the space.
It has a 12-month trailing dividend yield of 1.48%.
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.
Representing 27.90% of the portfolio, the fund has heaviest allocation to the Financials sector; Industrials and Consumer Discretionary round out the top three.
Taking into account individual holdings, The Mosaic Company (MOS - Free Report) accounts for about 1.17% of the fund's total assets, followed by United States Steel Corporation (X - Free Report) and Steel Dynamics, Inc. (STLD - Free Report) .
The top 10 holdings account for about 9.35% of total assets under management.
Performance and Risk
Year-to-date, the First Trust Mid Cap Value AlphaDEX ETF has lost about -2.22% so far, and it's up approximately 1.42% over the last 12 months (as of 06/03/2022). FNK has traded between $42.51 and $48.46 in this past 52-week period.
FNK has a beta of 1.29 and standard deviation of 32.86% 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 a reasonable option for investors seeking to outperform the Style Box - Mid Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.
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 $13.99 billion in assets, Vanguard MidCap Value ETF has $16.55 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?
Designed to provide broad exposure to the Style Box - Mid Cap Value category of the market, the First Trust Mid Cap Value AlphaDEX ETF (FNK - Free Report) is a smart beta exchange traded fund launched on 04/19/2011.
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.
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.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
FNK is managed by First Trust Advisors, and this fund has amassed over $239.04 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
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Operating expenses on an annual basis are 0.70% for this ETF, which makes it one of the most expensive products in the space.
It has a 12-month trailing dividend yield of 1.48%.
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.
Representing 27.90% of the portfolio, the fund has heaviest allocation to the Financials sector; Industrials and Consumer Discretionary round out the top three.
Taking into account individual holdings, The Mosaic Company (MOS - Free Report) accounts for about 1.17% of the fund's total assets, followed by United States Steel Corporation (X - Free Report) and Steel Dynamics, Inc. (STLD - Free Report) .
The top 10 holdings account for about 9.35% of total assets under management.
Performance and Risk
Year-to-date, the First Trust Mid Cap Value AlphaDEX ETF has lost about -2.22% so far, and it's up approximately 1.42% over the last 12 months (as of 06/03/2022). FNK has traded between $42.51 and $48.46 in this past 52-week period.
FNK has a beta of 1.29 and standard deviation of 32.86% 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 a reasonable option for investors seeking to outperform the Style Box - Mid Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.
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 $13.99 billion in assets, Vanguard MidCap Value ETF has $16.55 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.