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Is First Trust Small Cap Growth AlphaDEX ETF (FYC) a Strong ETF Right Now?
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Making its debut on 04/19/2011, smart beta exchange traded fund First Trust Small Cap Growth AlphaDEX ETF (FYC - Free Report) provides investors broad exposure to the Style Box - Small Cap Growth category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
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.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
Because the fund has amassed over $204.86 million, this makes it one of the average sized ETFs in the Style Box - Small Cap Growth. FYC is managed by First Trust Advisors. Before fees and expenses, this particular fund seeks to match the performance of the Nasdaq AlphaDEX Small Cap Growth Index.
The NASDAQ AlphaDEX Small Cap Growth Index is an enhanced which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 700 Small Cap Growth Index.
Cost & Other Expenses
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Operating expenses on an annual basis are 0.71% for this ETF, which makes it one of the more expensive products in the space.
It has a 12-month trailing dividend yield of 0.38%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 18.80% of the portfolio, the fund has heaviest allocation to the Industrials sector; Information Technology and Healthcare round out the top three.
Taking into account individual holdings, Modine Manufacturing Company (MOD - Free Report) accounts for about 0.90% of the fund's total assets, followed by Consol Energy Inc. (CEIX - Free Report) and Remitly Global, Inc. (RELY - Free Report) .
The top 10 holdings account for about 8.19% of total assets under management.
Performance and Risk
So far this year, FYC has added about 0.45%, and is down about -2.33% in the last one year (as of 11/06/2023). During this past 52-week period, the fund has traded between $51.50 and $63.88.
The fund has a beta of 1.18 and standard deviation of 25.25% for the trailing three-year period, which makes FYC a high risk choice in this particular space. With about 264 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Small Cap Growth AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - Small Cap Growth segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Russell 2000 Growth ETF (IWO - Free Report) tracks Russell 2000 Growth Index and the Vanguard Small-Cap Growth ETF (VBK - Free Report) tracks CRSP U.S. Small Cap Growth Index. IShares Russell 2000 Growth ETF has $8.85 billion in assets, Vanguard Small-Cap Growth ETF has $12.75 billion. IWO has an expense ratio of 0.24% and VBK charges 0.07%.
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 - Small Cap Growth.
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 Small Cap Growth AlphaDEX ETF (FYC) a Strong ETF Right Now?
Making its debut on 04/19/2011, smart beta exchange traded fund First Trust Small Cap Growth AlphaDEX ETF (FYC - Free Report) provides investors broad exposure to the Style Box - Small Cap Growth category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
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.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
Because the fund has amassed over $204.86 million, this makes it one of the average sized ETFs in the Style Box - Small Cap Growth. FYC is managed by First Trust Advisors. Before fees and expenses, this particular fund seeks to match the performance of the Nasdaq AlphaDEX Small Cap Growth Index.
The NASDAQ AlphaDEX Small Cap Growth Index is an enhanced which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 700 Small Cap Growth Index.
Cost & Other Expenses
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Operating expenses on an annual basis are 0.71% for this ETF, which makes it one of the more expensive products in the space.
It has a 12-month trailing dividend yield of 0.38%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 18.80% of the portfolio, the fund has heaviest allocation to the Industrials sector; Information Technology and Healthcare round out the top three.
Taking into account individual holdings, Modine Manufacturing Company (MOD - Free Report) accounts for about 0.90% of the fund's total assets, followed by Consol Energy Inc. (CEIX - Free Report) and Remitly Global, Inc. (RELY - Free Report) .
The top 10 holdings account for about 8.19% of total assets under management.
Performance and Risk
So far this year, FYC has added about 0.45%, and is down about -2.33% in the last one year (as of 11/06/2023). During this past 52-week period, the fund has traded between $51.50 and $63.88.
The fund has a beta of 1.18 and standard deviation of 25.25% for the trailing three-year period, which makes FYC a high risk choice in this particular space. With about 264 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Small Cap Growth AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - Small Cap Growth segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Russell 2000 Growth ETF (IWO - Free Report) tracks Russell 2000 Growth Index and the Vanguard Small-Cap Growth ETF (VBK - Free Report) tracks CRSP U.S. Small Cap Growth Index. IShares Russell 2000 Growth ETF has $8.85 billion in assets, Vanguard Small-Cap Growth ETF has $12.75 billion. IWO has an expense ratio of 0.24% and VBK charges 0.07%.
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 - Small Cap Growth.
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.