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Is First Trust Multi Cap Value AlphaDEX ETF (FAB) a Strong ETF Right Now?
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Making its debut on 05/08/2007, smart beta exchange traded fund First Trust Multi Cap Value AlphaDEX ETF (FAB - Free Report) provides investors broad exposure to the Style Box - All 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.
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.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: 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
The fund is managed by First Trust Advisors, and has been able to amass over $215.56 million, which makes it one of the average sized ETFs in the Style Box - All Cap Value. This particular fund, before fees and expenses, seeks to match the performance of the Nasdaq AlphaDEX Multi Cap Value Index.
The NASDAQ AlphaDEX Multi Cap Value Index is an enhanced index which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 500 Large Cap Index, NASDAQ US 600 Mid Cap Index and NASDAQ US 700 Small Cap Index.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Annual operating expenses for this ETF are 0.67%, making it one of the more expensive products in the space.
It's 12-month trailing dividend yield comes in at 1.70%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
FAB's heaviest allocation is in the Financials sector, which is about 27.10% of the portfolio. Its Consumer Discretionary and Industrials round out the top three.
When you look at individual holdings, Us Dollar ($USD) accounts for about 0.92% of the fund's total assets, followed by Moderna, Inc. (MRNA - Free Report) and Steel Dynamics, Inc. (STLD - Free Report) .
Its top 10 holdings account for approximately 5.78% of FAB's total assets under management.
Performance and Risk
So far this year, FAB has gained about 6.33%, and is down about -3.19% in the last one year (as of 01/12/2023). During this past 52-week period, the fund has traded between $60.81 and $77.49.
The fund has a beta of 1.20 and standard deviation of 32.03% for the trailing three-year period, which makes FAB a medium risk choice in this particular space. With about 675 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Multi Cap Value AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.
Dimensional U.S. Targeted Value ETF (DFAT - Free Report) tracks ---------------------------------------- and the iShares Core S&P U.S. Value ETF (IUSV - Free Report) tracks S&P 900 Value Index. Dimensional U.S. Targeted Value ETF has $7.77 billion in assets, iShares Core S&P U.S. Value ETF has $13.38 billion. DFAT has an expense ratio of 0.29% and IUSV 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 - All 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 Multi Cap Value AlphaDEX ETF (FAB) a Strong ETF Right Now?
Making its debut on 05/08/2007, smart beta exchange traded fund First Trust Multi Cap Value AlphaDEX ETF (FAB - Free Report) provides investors broad exposure to the Style Box - All 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.
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.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: 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
The fund is managed by First Trust Advisors, and has been able to amass over $215.56 million, which makes it one of the average sized ETFs in the Style Box - All Cap Value. This particular fund, before fees and expenses, seeks to match the performance of the Nasdaq AlphaDEX Multi Cap Value Index.
The NASDAQ AlphaDEX Multi Cap Value Index is an enhanced index which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 500 Large Cap Index, NASDAQ US 600 Mid Cap Index and NASDAQ US 700 Small Cap Index.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Annual operating expenses for this ETF are 0.67%, making it one of the more expensive products in the space.
It's 12-month trailing dividend yield comes in at 1.70%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
FAB's heaviest allocation is in the Financials sector, which is about 27.10% of the portfolio. Its Consumer Discretionary and Industrials round out the top three.
When you look at individual holdings, Us Dollar ($USD) accounts for about 0.92% of the fund's total assets, followed by Moderna, Inc. (MRNA - Free Report) and Steel Dynamics, Inc. (STLD - Free Report) .
Its top 10 holdings account for approximately 5.78% of FAB's total assets under management.
Performance and Risk
So far this year, FAB has gained about 6.33%, and is down about -3.19% in the last one year (as of 01/12/2023). During this past 52-week period, the fund has traded between $60.81 and $77.49.
The fund has a beta of 1.20 and standard deviation of 32.03% for the trailing three-year period, which makes FAB a medium risk choice in this particular space. With about 675 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Multi Cap Value AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.
Dimensional U.S. Targeted Value ETF (DFAT - Free Report) tracks ---------------------------------------- and the iShares Core S&P U.S. Value ETF (IUSV - Free Report) tracks S&P 900 Value Index. Dimensional U.S. Targeted Value ETF has $7.77 billion in assets, iShares Core S&P U.S. Value ETF has $13.38 billion. DFAT has an expense ratio of 0.29% and IUSV 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 - All 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.