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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?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
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.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
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
The fund is managed by First Trust Advisors. FXD has been able to amass assets over $1.45 billion, making it one of the largest ETFs in the Consumer Discretionary ETFs. FXD 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
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.
Annual operating expenses for this ETF are 0.61%, making it on par with most peer products in the space.
FXD's 12-month trailing dividend yield is 0.68%.
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.
FXD's heaviest allocation is in the Consumer Discretionary sector, which is about 75.40% of the portfolio. Its Industrials and Telecom round out the top three.
Taking into account individual holdings, Spotify Technology S.a. (SPOT - Free Report) accounts for about 1.81% of the fund's total assets, followed by Deckers Outdoor Corporation (DECK - Free Report) and Royal Caribbean Cruises Ltd. (RCL - Free Report) .
Its top 10 holdings account for approximately 16.23% of FXD's total assets under management.
Performance and Risk
The ETF has added roughly 0.41% and was up about 7.03% so far this year and in the past one year (as of 07/05/2024), respectively. FXD has traded between $46.79 and $64.54 during this last 52-week period.
FXD has a beta of 1.38 and standard deviation of 23.23% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 120 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 $5.54 billion in assets, Consumer Discretionary Select Sector SPDR ETF has $20 billion. VCR has an expense ratio of 0.10% and XLY charges 0.09%.
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?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
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.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
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
The fund is managed by First Trust Advisors. FXD has been able to amass assets over $1.45 billion, making it one of the largest ETFs in the Consumer Discretionary ETFs. FXD 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
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.
Annual operating expenses for this ETF are 0.61%, making it on par with most peer products in the space.
FXD's 12-month trailing dividend yield is 0.68%.
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.
FXD's heaviest allocation is in the Consumer Discretionary sector, which is about 75.40% of the portfolio. Its Industrials and Telecom round out the top three.
Taking into account individual holdings, Spotify Technology S.a. (SPOT - Free Report) accounts for about 1.81% of the fund's total assets, followed by Deckers Outdoor Corporation (DECK - Free Report) and Royal Caribbean Cruises Ltd. (RCL - Free Report) .
Its top 10 holdings account for approximately 16.23% of FXD's total assets under management.
Performance and Risk
The ETF has added roughly 0.41% and was up about 7.03% so far this year and in the past one year (as of 07/05/2024), respectively. FXD has traded between $46.79 and $64.54 during this last 52-week period.
FXD has a beta of 1.38 and standard deviation of 23.23% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 120 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 $5.54 billion in assets, Consumer Discretionary Select Sector SPDR ETF has $20 billion. VCR has an expense ratio of 0.10% and XLY charges 0.09%.
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.