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Is First Trust Health Care AlphaDEX ETF (FXH) a Strong ETF Right Now?
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The First Trust Health Care AlphaDEX ETF (FXH - Free Report) was launched on 05/08/2007, and is a smart beta exchange traded fund designed to offer broad exposure to the Health Care 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.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
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.
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
The fund is managed by First Trust Advisors, and has been able to amass over $1.47 billion, which makes it one of the larger ETFs in the Health Care ETFs. Before fees and expenses, this particular fund seeks to match the performance of the StrataQuant Health Care Index.
The StrataQuant Health Care Index employs the AlphaDEX stock selection methodology to select stocks from the Russell 1000 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 0.61% for this ETF, which makes it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 0.10%.
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 100% of the portfolio, the fund has heaviest allocation to the Healthcare sector.
Looking at individual holdings, Molina Healthcare, Inc. (MOH - Free Report) accounts for about 2.33% of total assets, followed by Moderna, Inc. (MRNA - Free Report) and Sarepta Therapeutics, Inc. (SRPT - Free Report) .
The top 10 holdings account for about 21.59% of total assets under management.
Performance and Risk
The ETF has lost about -15.34% so far this year and is down about -14.45% in the last one year (as of 11/09/2022). In the past 52-week period, it has traded between $96.46 and $124.74.
The fund has a beta of 0.83 and standard deviation of 23.90% for the trailing three-year period, which makes FXH a medium risk choice in this particular space. With about 83 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Health Care AlphaDEX ETF is a reasonable option for investors seeking to outperform the Health Care ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Health Care ETF (VHT - Free Report) tracks MSCI US Investable Market Health Care 25/50 Index and the Health Care Select Sector SPDR ETF (XLV - Free Report) tracks Health Care Select Sector Index. Vanguard Health Care ETF has $16.62 billion in assets, Health Care Select Sector SPDR ETF has $40.18 billion. VHT has an expense ratio of 0.10% and XLV charges 0.10%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Health Care 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 Health Care AlphaDEX ETF (FXH) a Strong ETF Right Now?
The First Trust Health Care AlphaDEX ETF (FXH - Free Report) was launched on 05/08/2007, and is a smart beta exchange traded fund designed to offer broad exposure to the Health Care 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.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
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.
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
The fund is managed by First Trust Advisors, and has been able to amass over $1.47 billion, which makes it one of the larger ETFs in the Health Care ETFs. Before fees and expenses, this particular fund seeks to match the performance of the StrataQuant Health Care Index.
The StrataQuant Health Care Index employs the AlphaDEX stock selection methodology to select stocks from the Russell 1000 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 0.61% for this ETF, which makes it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 0.10%.
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 100% of the portfolio, the fund has heaviest allocation to the Healthcare sector.
Looking at individual holdings, Molina Healthcare, Inc. (MOH - Free Report) accounts for about 2.33% of total assets, followed by Moderna, Inc. (MRNA - Free Report) and Sarepta Therapeutics, Inc. (SRPT - Free Report) .
The top 10 holdings account for about 21.59% of total assets under management.
Performance and Risk
The ETF has lost about -15.34% so far this year and is down about -14.45% in the last one year (as of 11/09/2022). In the past 52-week period, it has traded between $96.46 and $124.74.
The fund has a beta of 0.83 and standard deviation of 23.90% for the trailing three-year period, which makes FXH a medium risk choice in this particular space. With about 83 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Health Care AlphaDEX ETF is a reasonable option for investors seeking to outperform the Health Care ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Health Care ETF (VHT - Free Report) tracks MSCI US Investable Market Health Care 25/50 Index and the Health Care Select Sector SPDR ETF (XLV - Free Report) tracks Health Care Select Sector Index. Vanguard Health Care ETF has $16.62 billion in assets, Health Care Select Sector SPDR ETF has $40.18 billion. VHT has an expense ratio of 0.10% and XLV charges 0.10%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Health Care 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.