Is First Trust Dow 30 Equal Weight ETF (EDOW) a Strong ETF Right Now?
Launched on 08/08/2017, the First Trust Dow 30 Equal Weight ETF (EDOW) is a smart beta exchange traded fund offering broad exposure to the Style Box - Large Cap Blend category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
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.
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.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
The fund is managed by First Trust Advisors. EDOW has been able to amass assets over $255.09 million, making it one of the average sized ETFs in the Style Box - Large Cap Blend. This particular fund, before fees and expenses, seeks to match the performance of the Dow Jones Industrial Average Equal Weight Index.
The Dow Jones Industrial Average Equal Weight Index is an equally weighted index designed to be a price neutral version of the price-weighted DJIA.
Cost & Other Expenses
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Operating expenses on an annual basis are 0.50% for EDOW, making it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 2.26%.
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.
For EDOW, it has heaviest allocation in the Information Technology sector --about 20.80% of the portfolio --while Financials and Industrials round out the top three.
Taking into account individual holdings, Nike, Inc. (class B) (NKE) accounts for about 3.85% of the fund's total assets, followed by The Boeing Company (BA) and Intel Corporation (INTC).
The top 10 holdings account for about 36.26% of total assets under management.
Performance and Risk
So far this year, EDOW return is roughly 5.53%, and was up about 21.13% in the last one year (as of 03/22/2024). During this past 52-week period, the fund has traded between $28.08 and $34.26.
EDOW has a beta of 0.91 and standard deviation of 14.40% for the trailing three-year period. With about 31 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust Dow 30 Equal Weight ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Core S&P 500 ETF (IVV) tracks S&P 500 Index and the SPDR S&P 500 ETF (SPY) tracks S&P 500 Index. IShares Core S&P 500 ETF has $450.81 billion in assets, SPDR S&P 500 ETF has $532.63 billion. IVV has an expense ratio of 0.03% and SPY charges 0.09%.
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 - Large Cap Blend.
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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First Trust Dow 30 Equal Weight ETF (EDOW): ETF Research Reports
The Boeing Company (BA) : Free Stock Analysis Report
Intel Corporation (INTC) : Free Stock Analysis Report
NIKE, Inc. (NKE) : Free Stock Analysis Report
SPDR S&P 500 ETF (SPY): ETF Research Reports
iShares Core S&P 500 ETF (IVV): ETF Research Reports
