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

Zacks Equity Research
·4 min read

The First Trust Dow Jones Global Select Dividend ETF (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?

Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.

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.

On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.

Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.

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, and has been able to amass over $341.44 million, which makes it one of the average sized ETFs in the Broad Developed World ETFs. This particular fund 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

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 0.59% for this ETF, which makes it one of the more expensive products in the space.

The fund has a 12-month trailing dividend yield of 7.19%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

When you look at individual holdings, Bankia, S.a. (BKIA.SM) accounts for about 2.54% of the fund's total assets, followed by Invesco Ltd. (IVZ) and Navient Corporation (NAVI).

The top 10 holdings account for about 15.55% of total assets under management.

Performance and Risk

The ETF has lost about -22.99% and is down about -18.94% so far this year and in the past one year (as of 11/03/2020), respectively. FGD has traded between $13.90 and $25.20 during this last 52-week period.

The fund has a beta of 0.96 and standard deviation of 24.24% for the trailing three-year period, which makes FGD a low risk choice in this particular space. With about 96 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust Dow Jones Global Select Dividend ETF 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 $12.64 billion in assets, Vanguard Total World Stock ETF has $14.10 billion. ACWI has an expense ratio of 0.32% and VT charges 0.08%.

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 ETF (FGD): ETF Research Reports
 
Invesco Ltd. (IVZ) : Free Stock Analysis Report
 
Navient Corporation (NAVI) : Free Stock Analysis Report
 
iShares MSCI ACWI ETF (ACWI): ETF Research Reports
 
Vanguard Total World Stock ETF (VT): ETF Research Reports
 
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