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Is First Trust Multi Cap Growth AlphaDEX ETF (FAD) a Strong ETF Right Now?
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Launched on 05/08/2007, the First Trust Multi Cap Growth AlphaDEX ETF (FAD - Free Report) is a smart beta exchange traded fund offering broad exposure to the Style Box - All 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.
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.
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.
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
FAD is managed by First Trust Advisors, and this fund has amassed over $238.50 million, which makes it one of the average sized ETFs in the Style Box - All Cap Growth. Before fees and expenses, this particular fund seeks to match the performance of the Nasdaq AlphaDEX Multi Cap Growth Index.
The NASDAQ AlphaDEX Multi Cap Growth Index is an enhanced 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
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 0.64% for FAD, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.36%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Industrials sector - about 25.90% of the portfolio. Information Technology and Consumer Discretionary round out the top three.
Looking at individual holdings, Deckers Outdoor Corporation (DECK - Free Report) accounts for about 0.57% of total assets, followed by Uber Technologies, Inc. (UBER - Free Report) and Royal Caribbean Cruises Ltd. (RCL - Free Report) .
FAD's top 10 holdings account for about 5.34% of its total assets under management.
Performance and Risk
So far this year, FAD has added about 9.16%, and it's up approximately 27.89% in the last one year (as of 04/10/2024). During this past 52-week period, the fund has traded between $92.91 and $124.60.
The ETF has a beta of 1.10 and standard deviation of 20.58% for the trailing three-year period, making it a medium risk choice in the space. With about 677 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Multi Cap Growth AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Growth segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Morningstar Growth ETF (ILCG - Free Report) tracks MORNINGSTAR US LARGE-MID CP BRD GRWTH ID and the iShares Core S&P U.S. Growth ETF (IUSG - Free Report) tracks S&P 900 Growth Index. IShares Morningstar Growth ETF has $2.10 billion in assets, iShares Core S&P U.S. Growth ETF has $16.87 billion. ILCG has an expense ratio of 0.04% and IUSG 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 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 Multi Cap Growth AlphaDEX ETF (FAD) a Strong ETF Right Now?
Launched on 05/08/2007, the First Trust Multi Cap Growth AlphaDEX ETF (FAD - Free Report) is a smart beta exchange traded fund offering broad exposure to the Style Box - All 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.
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.
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.
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
FAD is managed by First Trust Advisors, and this fund has amassed over $238.50 million, which makes it one of the average sized ETFs in the Style Box - All Cap Growth. Before fees and expenses, this particular fund seeks to match the performance of the Nasdaq AlphaDEX Multi Cap Growth Index.
The NASDAQ AlphaDEX Multi Cap Growth Index is an enhanced 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
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 0.64% for FAD, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.36%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Industrials sector - about 25.90% of the portfolio. Information Technology and Consumer Discretionary round out the top three.
Looking at individual holdings, Deckers Outdoor Corporation (DECK - Free Report) accounts for about 0.57% of total assets, followed by Uber Technologies, Inc. (UBER - Free Report) and Royal Caribbean Cruises Ltd. (RCL - Free Report) .
FAD's top 10 holdings account for about 5.34% of its total assets under management.
Performance and Risk
So far this year, FAD has added about 9.16%, and it's up approximately 27.89% in the last one year (as of 04/10/2024). During this past 52-week period, the fund has traded between $92.91 and $124.60.
The ETF has a beta of 1.10 and standard deviation of 20.58% for the trailing three-year period, making it a medium risk choice in the space. With about 677 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Multi Cap Growth AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Growth segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Morningstar Growth ETF (ILCG - Free Report) tracks MORNINGSTAR US LARGE-MID CP BRD GRWTH ID and the iShares Core S&P U.S. Growth ETF (IUSG - Free Report) tracks S&P 900 Growth Index. IShares Morningstar Growth ETF has $2.10 billion in assets, iShares Core S&P U.S. Growth ETF has $16.87 billion. ILCG has an expense ratio of 0.04% and IUSG 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 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.