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Is First Trust Consumer Discretionary AlphaDEX ETF (FXD) a Strong ETF Right Now?
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Making its debut on 05/08/2007, smart beta exchange traded fund First Trust Consumer Discretionary AlphaDEX ETF (FXD - Free Report) provides investors broad exposure to the Consumer Discretionary 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.
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.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is sponsored by First Trust Advisors. It has amassed assets over $1.43 billion, making it one of the largest ETFs in the Consumer Discretionary ETFs. This particular fund seeks to match the performance of the StrataQuant Consumer Discretionary Index before fees and expenses.
The StrataQuant Consumer Discretionary Index employs the AlphaDEX stock selection methodology to select stocks from the Russell 1000 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 FXD are 0.61%, which makes it on par with most peer products in the space.
FXD's 12-month trailing dividend yield is 0.87%.
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.
For FXD, it has heaviest allocation in the Consumer Discretionary sector --about 74% of the portfolio --while Industrials and Telecom round out the top three.
Looking at individual holdings, Delta Air Lines, Inc. (DAL - Free Report) accounts for about 1.81% of total assets, followed by Draftkings Inc. (DKNG - Free Report) and Lithia Motors, Inc. (LAD - Free Report) .
FXD's top 10 holdings account for about 16.72% of its total assets under management.
Performance and Risk
Year-to-date, the First Trust Consumer Discretionary AlphaDEX ETF has gained about 11.88% so far, and is up about 5.69% over the last 12 months (as of 08/22/2023). FXD has traded between $43.02 and $58.14 in this past 52-week period.
The fund has a beta of 1.33 and standard deviation of 23.42% for the trailing three-year period, which makes FXD a medium risk choice in this particular space. With about 123 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Consumer Discretionary AlphaDEX ETF is a reasonable option for investors seeking to outperform the Consumer Discretionary ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Consumer Discretionary ETF (VCR - Free Report) tracks MSCI US Investable Market Consumer Discretionary 25/50 Index and the Consumer Discretionary Select Sector SPDR ETF (XLY - Free Report) tracks Consumer Discretionary Select Sector Index. Vanguard Consumer Discretionary ETF has $4.94 billion in assets, Consumer Discretionary Select Sector SPDR ETF has $16.86 billion. VCR has an expense ratio of 0.10% and XLY 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 Consumer Discretionary 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 Consumer Discretionary AlphaDEX ETF (FXD) a Strong ETF Right Now?
Making its debut on 05/08/2007, smart beta exchange traded fund First Trust Consumer Discretionary AlphaDEX ETF (FXD - Free Report) provides investors broad exposure to the Consumer Discretionary 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.
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.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is sponsored by First Trust Advisors. It has amassed assets over $1.43 billion, making it one of the largest ETFs in the Consumer Discretionary ETFs. This particular fund seeks to match the performance of the StrataQuant Consumer Discretionary Index before fees and expenses.
The StrataQuant Consumer Discretionary Index employs the AlphaDEX stock selection methodology to select stocks from the Russell 1000 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 FXD are 0.61%, which makes it on par with most peer products in the space.
FXD's 12-month trailing dividend yield is 0.87%.
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.
For FXD, it has heaviest allocation in the Consumer Discretionary sector --about 74% of the portfolio --while Industrials and Telecom round out the top three.
Looking at individual holdings, Delta Air Lines, Inc. (DAL - Free Report) accounts for about 1.81% of total assets, followed by Draftkings Inc. (DKNG - Free Report) and Lithia Motors, Inc. (LAD - Free Report) .
FXD's top 10 holdings account for about 16.72% of its total assets under management.
Performance and Risk
Year-to-date, the First Trust Consumer Discretionary AlphaDEX ETF has gained about 11.88% so far, and is up about 5.69% over the last 12 months (as of 08/22/2023). FXD has traded between $43.02 and $58.14 in this past 52-week period.
The fund has a beta of 1.33 and standard deviation of 23.42% for the trailing three-year period, which makes FXD a medium risk choice in this particular space. With about 123 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Consumer Discretionary AlphaDEX ETF is a reasonable option for investors seeking to outperform the Consumer Discretionary ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Consumer Discretionary ETF (VCR - Free Report) tracks MSCI US Investable Market Consumer Discretionary 25/50 Index and the Consumer Discretionary Select Sector SPDR ETF (XLY - Free Report) tracks Consumer Discretionary Select Sector Index. Vanguard Consumer Discretionary ETF has $4.94 billion in assets, Consumer Discretionary Select Sector SPDR ETF has $16.86 billion. VCR has an expense ratio of 0.10% and XLY 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 Consumer Discretionary 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.