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Is First Trust Multi Cap Growth AlphaDEX ETF (FAD) a Strong ETF Right Now?
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Designed to provide broad exposure to the Style Box - All Cap Growth category of the market, the First Trust Multi Cap Growth AlphaDEX ETF (FAD - Free Report) is a smart beta exchange traded fund launched on 05/08/2007.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide 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.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
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
The fund is sponsored by First Trust Advisors. It has amassed assets over $242 million, making it one of the average sized ETFs in the Style Box - All Cap Growth. This particular fund, before fees and expenses, 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
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.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.62%.
The fund has a 12-month trailing dividend yield of 0.55%.
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.
FAD's heaviest allocation is in the Industrials sector, which is about 18.90% of the portfolio. Its Financials and Information Technology round out the top three.
Looking at individual holdings, Applovin Corp. (class A) (APP - Free Report) accounts for about 1.08% of total assets, followed by Palantir Technologies Inc. (class A) (PLTR - Free Report) and Axon Enterprise Inc. (AXON - Free Report) .
The top 10 holdings account for about 6.36% of total assets under management.
Performance and Risk
The ETF has gained about 6.06% so far this year and is up about 25.22% in the last one year (as of 02/17/2025). In the past 52-week period, it has traded between $114.61 and $150.30.
The fund has a beta of 1.14 and standard deviation of 20% for the trailing three-year period, which makes FAD a medium risk choice in this particular space. With about 677 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Multi Cap Growth AlphaDEX ETF is an excellent option for investors seeking to outperform the Style Box - All Cap Growth segment of the market. There are other ETFs in the space which investors could consider as well.
Fidelity Blue Chip Growth ETF (FBCG - Free Report) tracks ---------------------------------------- and the iShares Core S&P U.S. Growth ETF (IUSG - Free Report) tracks S&P 900 Growth Index. Fidelity Blue Chip Growth ETF has $4.23 billion in assets, iShares Core S&P U.S. Growth ETF has $21.71 billion. FBCG has an expense ratio of 0.59% 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?
Designed to provide broad exposure to the Style Box - All Cap Growth category of the market, the First Trust Multi Cap Growth AlphaDEX ETF (FAD - Free Report) is a smart beta exchange traded fund launched on 05/08/2007.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide 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.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
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
The fund is sponsored by First Trust Advisors. It has amassed assets over $242 million, making it one of the average sized ETFs in the Style Box - All Cap Growth. This particular fund, before fees and expenses, 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
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.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.62%.
The fund has a 12-month trailing dividend yield of 0.55%.
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.
FAD's heaviest allocation is in the Industrials sector, which is about 18.90% of the portfolio. Its Financials and Information Technology round out the top three.
Looking at individual holdings, Applovin Corp. (class A) (APP - Free Report) accounts for about 1.08% of total assets, followed by Palantir Technologies Inc. (class A) (PLTR - Free Report) and Axon Enterprise Inc. (AXON - Free Report) .
The top 10 holdings account for about 6.36% of total assets under management.
Performance and Risk
The ETF has gained about 6.06% so far this year and is up about 25.22% in the last one year (as of 02/17/2025). In the past 52-week period, it has traded between $114.61 and $150.30.
The fund has a beta of 1.14 and standard deviation of 20% for the trailing three-year period, which makes FAD a medium risk choice in this particular space. With about 677 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Multi Cap Growth AlphaDEX ETF is an excellent option for investors seeking to outperform the Style Box - All Cap Growth segment of the market. There are other ETFs in the space which investors could consider as well.
Fidelity Blue Chip Growth ETF (FBCG - Free Report) tracks ---------------------------------------- and the iShares Core S&P U.S. Growth ETF (IUSG - Free Report) tracks S&P 900 Growth Index. Fidelity Blue Chip Growth ETF has $4.23 billion in assets, iShares Core S&P U.S. Growth ETF has $21.71 billion. FBCG has an expense ratio of 0.59% 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.