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Is First Trust Consumer Discretionary AlphaDEX ETF (FXD) a Strong ETF Right Now?
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The First Trust Consumer Discretionary AlphaDEX ETF (FXD - Free Report) made its debut on 05/08/2007, and is a smart beta exchange traded fund that provides broad exposure to the Consumer Discretionary ETFs category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
The fund is managed by First Trust Advisors, and has been able to amass over $1.28 billion, which makes it one of the largest ETFs in the Consumer Discretionary ETFs. Before fees and expenses, this particular fund seeks to match the performance of the StrataQuant Consumer Discretionary Index.
The StrataQuant Consumer Discretionary Index employs the AlphaDEX stock selection methodology to select stocks from the Russell 1000 Index.
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.
Operating expenses on an annual basis are 0.61% for FXD, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 0.82%.
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 77.80% of the portfolio --while Industrials and Telecom round out the top three.
When you look at individual holdings, Capri Holdings Limited (CPRI - Free Report) accounts for about 1.68% of the fund's total assets, followed by Wayfair Inc. (class A) (W - Free Report) and Draftkings Inc. (DKNG - Free Report) .
Its top 10 holdings account for approximately 15.16% of FXD's total assets under management.
Performance and Risk
The ETF has added roughly 1.05% and is up about 6.57% so far this year and in the past one year (as of 10/25/2023), respectively. FXD has traded between $46.09 and $58.14 during this last 52-week period.
The ETF has a beta of 1.33 and standard deviation of 23.35% for the trailing three-year period, making it a medium risk choice in the space. With about 121 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 $4.58 billion in assets, Consumer Discretionary Select Sector SPDR ETF has $15.90 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?
The First Trust Consumer Discretionary AlphaDEX ETF (FXD - Free Report) made its debut on 05/08/2007, and is a smart beta exchange traded fund that provides broad exposure to the Consumer Discretionary ETFs category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
The fund is managed by First Trust Advisors, and has been able to amass over $1.28 billion, which makes it one of the largest ETFs in the Consumer Discretionary ETFs. Before fees and expenses, this particular fund seeks to match the performance of the StrataQuant Consumer Discretionary Index.
The StrataQuant Consumer Discretionary Index employs the AlphaDEX stock selection methodology to select stocks from the Russell 1000 Index.
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.
Operating expenses on an annual basis are 0.61% for FXD, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 0.82%.
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 77.80% of the portfolio --while Industrials and Telecom round out the top three.
When you look at individual holdings, Capri Holdings Limited (CPRI - Free Report) accounts for about 1.68% of the fund's total assets, followed by Wayfair Inc. (class A) (W - Free Report) and Draftkings Inc. (DKNG - Free Report) .
Its top 10 holdings account for approximately 15.16% of FXD's total assets under management.
Performance and Risk
The ETF has added roughly 1.05% and is up about 6.57% so far this year and in the past one year (as of 10/25/2023), respectively. FXD has traded between $46.09 and $58.14 during this last 52-week period.
The ETF has a beta of 1.33 and standard deviation of 23.35% for the trailing three-year period, making it a medium risk choice in the space. With about 121 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 $4.58 billion in assets, Consumer Discretionary Select Sector SPDR ETF has $15.90 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.