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Is First Trust Technology AlphaDEX ETF (FXL) a Strong ETF Right Now?
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Making its debut on 05/08/2007, smart beta exchange traded fund First Trust Technology AlphaDEX ETF (FXL - Free Report) provides investors broad exposure to the Technology ETFs 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.
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.
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.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
The fund is managed by First Trust Advisors. FXL has been able to amass assets over $1.12 billion, making it one of the larger ETFs in the Technology ETFs. This particular fund seeks to match the performance of the StrataQuant Technology Index before fees and expenses.
The StrataQuant Technology Index is a modified equal-dollar weighted index designed by the AMEX to objectively identify and select stocks from the Russell 1000 Index that may generate positive alpha relative to traditional passive style indices through the use of the AlphaDEX screening methodology.
Cost & Other Expenses
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.61%.
It's 12-month trailing dividend yield comes in at 0.25%.
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.
Representing 82.60% of the portfolio, the fund has heaviest allocation to the Information Technology sector; Industrials and Telecom round out the top three.
Taking into account individual holdings, Meta Platforms Inc. (class A) (META - Free Report) accounts for about 2.61% of the fund's total assets, followed by Cirrus Logic, Inc. (CRUS - Free Report) and Skyworks Solutions, Inc. (SWKS - Free Report) .
Its top 10 holdings account for approximately 19.34% of FXL's total assets under management.
Performance and Risk
The ETF has added roughly 19.06% and is up about 4.51% so far this year and in the past one year (as of 06/09/2023), respectively. FXL has traded between $84.85 and $109.45 during this last 52-week period.
The ETF has a beta of 1.18 and standard deviation of 26.87% for the trailing three-year period, making it a medium risk choice in the space. With about 100 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Technology AlphaDEX ETF is an excellent option for investors seeking to outperform the Technology ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
Technology Select Sector SPDR ETF (XLK - Free Report) tracks Technology Select Sector Index and the Vanguard Information Technology ETF (VGT - Free Report) tracks MSCI US Investable Market Information Technology 25/50 Index. Technology Select Sector SPDR ETF has $47.15 billion in assets, Vanguard Information Technology ETF has $51.07 billion. XLK has an expense ratio of 0.10% and VGT 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 Technology 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 Technology AlphaDEX ETF (FXL) a Strong ETF Right Now?
Making its debut on 05/08/2007, smart beta exchange traded fund First Trust Technology AlphaDEX ETF (FXL - Free Report) provides investors broad exposure to the Technology ETFs 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.
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.
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.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
The fund is managed by First Trust Advisors. FXL has been able to amass assets over $1.12 billion, making it one of the larger ETFs in the Technology ETFs. This particular fund seeks to match the performance of the StrataQuant Technology Index before fees and expenses.
The StrataQuant Technology Index is a modified equal-dollar weighted index designed by the AMEX to objectively identify and select stocks from the Russell 1000 Index that may generate positive alpha relative to traditional passive style indices through the use of the AlphaDEX screening methodology.
Cost & Other Expenses
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.61%.
It's 12-month trailing dividend yield comes in at 0.25%.
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.
Representing 82.60% of the portfolio, the fund has heaviest allocation to the Information Technology sector; Industrials and Telecom round out the top three.
Taking into account individual holdings, Meta Platforms Inc. (class A) (META - Free Report) accounts for about 2.61% of the fund's total assets, followed by Cirrus Logic, Inc. (CRUS - Free Report) and Skyworks Solutions, Inc. (SWKS - Free Report) .
Its top 10 holdings account for approximately 19.34% of FXL's total assets under management.
Performance and Risk
The ETF has added roughly 19.06% and is up about 4.51% so far this year and in the past one year (as of 06/09/2023), respectively. FXL has traded between $84.85 and $109.45 during this last 52-week period.
The ETF has a beta of 1.18 and standard deviation of 26.87% for the trailing three-year period, making it a medium risk choice in the space. With about 100 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Technology AlphaDEX ETF is an excellent option for investors seeking to outperform the Technology ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
Technology Select Sector SPDR ETF (XLK - Free Report) tracks Technology Select Sector Index and the Vanguard Information Technology ETF (VGT - Free Report) tracks MSCI US Investable Market Information Technology 25/50 Index. Technology Select Sector SPDR ETF has $47.15 billion in assets, Vanguard Information Technology ETF has $51.07 billion. XLK has an expense ratio of 0.10% and VGT 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 Technology 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.