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Is First Trust Dorsey Wright Dynamic Focus 5 ETF (FVC) a Hot ETF Right Now?

Sweta Killa
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Launched on 03/17/2016, the First Trust Dorsey Wright Dynamic Focus 5 ETF (FVC) is a smart beta exchange traded fund offering broad exposure to the Total Portfolio ETFs category of the U.S. equity market.

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.

Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well 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.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

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

The fund is managed by First Trust Advisors. FVC has been able to amass assets over $492.44 M, making it one of the largest ETFs in the Total Portfolio ETFs. FVC seeks to match the performance of the Dorsey Wright Dynamic Focus Five Index before fees and expenses.

The Dorsey Wright Dynamic Focus Five Index provides targeted exposure to five First Trust sector and industry based ETFs and the Nasdaq US T-Bill 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 this ETF are 0.30%, making it the least expensive product in the space.

It's 12-month trailing dividend yield comes in at 0.61%.

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.

Taking into account individual holdings, First Trust Dow Jones Internet Index Fund (FDN) accounts for about 21.90% of the fund's total assets, followed by First Trust Nasdaq Bank Etf (FTXO) and First Trust Technology Alphadex???? Fund (FXL).

Its top 10 holdings account for approximately 99.94% of FVC's total assets under management.

Performance and Risk

The ETF return is roughly 8.70% so far this year and was up about 22.74% in the last one year (as of 05/14/2018). In the past 52-week period, it has traded between $22.44 and $28.74.

FVC has a beta of 0.79 and standard deviation of 12.95% for the trailing three-year period. With about 5 holdings, it has more concentrated exposure than peers.

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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