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Is First Trust Dow Jones Global Select Dividend Index Fund (FGD) a Strong ETF Right Now?

Zacks Equity Research

The First Trust Dow Jones Global Select Dividend Index Fund (FGD) made its debut on 11/21/2007, and is a smart beta exchange traded fund that provides broad exposure to the Broad Developed World ETFs category of the 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.

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.

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.

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.

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

FGD is managed by First Trust Advisors, and this fund has amassed over $539.87 M, which makes it one of the average sized ETFs in the Broad Developed World ETFs. FGD seeks to match the performance of the Dow Jones Global Select Dividend Index before fees and expenses.

This Index is an indicated annual dividend yield weighted index of 100 stocks selected from the developed-market portion of the Dow Jones World Index.

Cost & Other Expenses

When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.

Operating expenses on an annual basis are 0.58% for FGD, making it one of the more expensive products in the space.

FGD's 12-month trailing dividend yield is 5.21%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

Looking at individual holdings, Standard Life Aberdeen Plc (SLA.LN) accounts for about 1.67% of total assets, followed by Be Semiconductor Industries N.v. (BESI.NA) and Harvey Norman Holdings Limited (HVN.AU).

FGD's top 10 holdings account for about 15.02% of its total assets under management.

Performance and Risk

So far this year, FGD has added roughly 9.86%, and is down about -3.37% in the last one year (as of 09/20/2019). During this past 52-week period, the fund has traded between $21.06 and $25.44.

The ETF has a beta of 0.80 and standard deviation of 11.44% for the trailing three-year period, making it a low risk choice in the space. With about 100 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust Dow Jones Global Select Dividend Index Fund is not a suitable option for investors seeking to outperform the Broad Developed World ETFs segment of the market. Instead, there are other ETFs in the space which investors should consider.

IShares MSCI ACWI ETF (ACWI) tracks MSCI All Country World Index and the Vanguard Total World Stock ETF (VT) tracks FTSE Global All Cap Index. IShares MSCI ACWI ETF has $10.79 B in assets, Vanguard Total World Stock ETF has $12.10 B. ACWI has an expense ratio of 0.31% and VT 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 Broad Developed World ETFs.

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 Jones Global Select Dividend Index Fund (FGD): ETF Research Reports
 
iShares MSCI ACWI ETF (ACWI): ETF Research Reports
 
Vanguard Total World Stock ETF (VT): ETF Research Reports
 
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