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Is First Trust Technology AlphaDEX ETF (FXL) a Strong ETF Right Now?
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The First Trust Technology AlphaDEX ETF (FXL - Free Report) made its debut on 05/08/2007, and is a smart beta exchange traded fund that provides broad exposure to the Technology 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.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option 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.
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.
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
Managed by First Trust Advisors, FXL has amassed assets over $1.38 billion, making it one of the larger ETFs in the Technology ETFs. This particular fund, before fees and expenses, seeks to match the performance of the StrataQuant Technology Index.
The StrataQuant Technology Index is a modified equal-dollar weighted index designed by the AMEX to objectively identify and select stocks from the Russell 1000 Index that may generate positive alpha relative to traditional passive style indices through the use of the AlphaDEX screening methodology.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Operating expenses on an annual basis are 0.62% for FXL, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 0.37%.
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.
For FXL, it has heaviest allocation in the Information Technology sector --about 82.30% of the portfolio --while Industrials and Telecom round out the top three.
Looking at individual holdings, Nvidia Corporation (NVDA - Free Report) accounts for about 2.40% of total assets, followed by Pure Storage, Inc. (class A) (PSTG - Free Report) and Applovin Corp. (class A) (APP - Free Report) .
FXL's top 10 holdings account for about 20.05% of its total assets under management.
Performance and Risk
The ETF has added about 8.74% and was up about 23.35% so far this year and in the past one year (as of 07/09/2024), respectively. FXL has traded between $104.07 and $139.14 during this last 52-week period.
The ETF has a beta of 1.14 and standard deviation of 24.68% for the trailing three-year period, making it a medium risk choice in the space. With about 97 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Technology AlphaDEX ETF is an excellent option for investors seeking to outperform the Technology ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
Technology Select Sector SPDR ETF (XLK - Free Report) tracks Technology Select Sector Index and the Vanguard Information Technology ETF (VGT - Free Report) tracks MSCI US Investable Market Information Technology 25/50 Index. Technology Select Sector SPDR ETF has $72.90 billion in assets, Vanguard Information Technology ETF has $77.40 billion. XLK has an expense ratio of 0.09% and VGT 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 Technology 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 Technology AlphaDEX ETF (FXL) a Strong ETF Right Now?
The First Trust Technology AlphaDEX ETF (FXL - Free Report) made its debut on 05/08/2007, and is a smart beta exchange traded fund that provides broad exposure to the Technology 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.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option 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.
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.
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
Managed by First Trust Advisors, FXL has amassed assets over $1.38 billion, making it one of the larger ETFs in the Technology ETFs. This particular fund, before fees and expenses, seeks to match the performance of the StrataQuant Technology Index.
The StrataQuant Technology Index is a modified equal-dollar weighted index designed by the AMEX to objectively identify and select stocks from the Russell 1000 Index that may generate positive alpha relative to traditional passive style indices through the use of the AlphaDEX screening methodology.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Operating expenses on an annual basis are 0.62% for FXL, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 0.37%.
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.
For FXL, it has heaviest allocation in the Information Technology sector --about 82.30% of the portfolio --while Industrials and Telecom round out the top three.
Looking at individual holdings, Nvidia Corporation (NVDA - Free Report) accounts for about 2.40% of total assets, followed by Pure Storage, Inc. (class A) (PSTG - Free Report) and Applovin Corp. (class A) (APP - Free Report) .
FXL's top 10 holdings account for about 20.05% of its total assets under management.
Performance and Risk
The ETF has added about 8.74% and was up about 23.35% so far this year and in the past one year (as of 07/09/2024), respectively. FXL has traded between $104.07 and $139.14 during this last 52-week period.
The ETF has a beta of 1.14 and standard deviation of 24.68% for the trailing three-year period, making it a medium risk choice in the space. With about 97 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Technology AlphaDEX ETF is an excellent option for investors seeking to outperform the Technology ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
Technology Select Sector SPDR ETF (XLK - Free Report) tracks Technology Select Sector Index and the Vanguard Information Technology ETF (VGT - Free Report) tracks MSCI US Investable Market Information Technology 25/50 Index. Technology Select Sector SPDR ETF has $72.90 billion in assets, Vanguard Information Technology ETF has $77.40 billion. XLK has an expense ratio of 0.09% and VGT 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 Technology 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.