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Is First Trust Small Cap Growth AlphaDEX ETF (FYC) a Strong ETF Right Now?
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The First Trust Small Cap Growth AlphaDEX ETF (FYC - Free Report) was launched on 04/19/2011, and is a smart beta exchange traded fund designed to offer 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.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
The fund is sponsored by First Trust Advisors. It has amassed assets over $288.31 million, making it one of the average sized ETFs in the Style Box - Small Cap Growth. This particular fund, before fees and expenses, 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
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Annual operating expenses for FYC are 0.70%, which makes it one of the most expensive products in the space.
It's 12-month trailing dividend yield comes in at 0.43%.
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.
Representing 22.90% of the portfolio, the fund has heaviest allocation to the Healthcare sector; Industrials and Information Technology round out the top three.
Looking at individual holdings, Adma Biologics, Inc. (ADMA - Free Report) accounts for about 1.03% of total assets, followed by Summit Therapeutics Inc. (SMMT - Free Report) and Procept Biorobotics Corporation (PRCT - Free Report) .
The top 10 holdings account for about 8.7% of total assets under management.
Performance and Risk
The ETF return is roughly 12.75% and is up about 13.71% so far this year and in the past one year (as of 07/18/2024), respectively. FYC has traded between $51.50 and $72.07 during this last 52-week period.
The ETF has a beta of 1.18 and standard deviation of 23.75% for the trailing three-year period, making it a high risk choice in the 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 $11.96 billion in assets, Vanguard Small-Cap Growth ETF has $17.88 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?
The First Trust Small Cap Growth AlphaDEX ETF (FYC - Free Report) was launched on 04/19/2011, and is a smart beta exchange traded fund designed to offer 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.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
The fund is sponsored by First Trust Advisors. It has amassed assets over $288.31 million, making it one of the average sized ETFs in the Style Box - Small Cap Growth. This particular fund, before fees and expenses, 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
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Annual operating expenses for FYC are 0.70%, which makes it one of the most expensive products in the space.
It's 12-month trailing dividend yield comes in at 0.43%.
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.
Representing 22.90% of the portfolio, the fund has heaviest allocation to the Healthcare sector; Industrials and Information Technology round out the top three.
Looking at individual holdings, Adma Biologics, Inc. (ADMA - Free Report) accounts for about 1.03% of total assets, followed by Summit Therapeutics Inc. (SMMT - Free Report) and Procept Biorobotics Corporation (PRCT - Free Report) .
The top 10 holdings account for about 8.7% of total assets under management.
Performance and Risk
The ETF return is roughly 12.75% and is up about 13.71% so far this year and in the past one year (as of 07/18/2024), respectively. FYC has traded between $51.50 and $72.07 during this last 52-week period.
The ETF has a beta of 1.18 and standard deviation of 23.75% for the trailing three-year period, making it a high risk choice in the 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 $11.96 billion in assets, Vanguard Small-Cap Growth ETF has $17.88 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.