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Should First Trust Growth Strength ETF (FTGS) Be on Your Investing Radar?

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Launched on 10/25/2022, the First Trust Growth Strength ETF (FTGS - Free Report) is a passively managed exchange traded fund designed to provide a broad exposure to the Large Cap Growth segment of the US equity market.

The fund is sponsored by First Trust Advisors. It has amassed assets over $867.50 million, making it one of the average sized ETFs attempting to match the Large Cap Growth segment of the US equity market.

Why Large Cap Growth

Companies that find themselves in the large cap category typically have a market capitalization above $10 billion. Considered a more stable option, large cap companies boast more predictable cash flows and are less volatile than their mid and small cap counterparts.

Qualities of growth stocks include faster growth rates compared to the broader market, as well as higher valuations and higher than average sales and earnings growth rates. Additionally, growth stocks have a greater level of risk associated with them. Even though growth stocks are more likely to outperform their value counterparts in strong bull markets, value stocks have a record of delivering better returns in almost all markets than growth stocks.

Costs

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for this ETF are 0.60%, making it one of the more expensive products in the space.

It has a 12-month trailing dividend yield of 0.52%.

Sector Exposure and Top Holdings

ETFs offer a 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 to the Financials sector--about 26.10% of the portfolio. Information Technology and Industrials round out the top three.

Looking at individual holdings, Cadence Design Systems, Inc. (CDNS - Free Report) accounts for about 2.26% of total assets, followed by Amazon.com, Inc. (AMZN - Free Report) and Conocophillips (COP - Free Report) .

The top 10 holdings account for about 21.12% of total assets under management.

Performance and Risk

FTGS seeks to match the performance of the THE GROWTH STRENGTH INDEX before fees and expenses. The Growth Strength Index provides exposure to a mix of domestic equities with filters for liquidity, return on equity, long-term debt, revenue and cash flow growth.

The ETF has gained about 19.78% so far this year and was up about 22.03% in the last one year (as of 12/16/2024). In the past 52-week period, it has traded between $26.46 and $33.31.

The ETF has a beta of 1.13 and standard deviation of 15.86% for the trailing three-year period. With about 51 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust Growth Strength ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, FTGS is a good option for those seeking exposure to the Style Box - Large Cap Growth area of the market. Investors might also want to consider some other ETF options in the space.

The Vanguard Growth ETF (VUG - Free Report) and the Invesco QQQ (QQQ - Free Report) track a similar index. While Vanguard Growth ETF has $158.58 billion in assets, Invesco QQQ has $328.29 billion. VUG has an expense ratio of 0.04% and QQQ charges 0.20%.

Bottom-Line

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

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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