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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) was launched on 11/21/2007, and is a smart beta exchange traded fund designed to offer broad exposure to the Broad Developed World ETFs 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.

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.

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 $501.97 M, making it one of the average sized ETFs in the Broad Developed World ETFs. Before fees and expenses, FGD seeks to match the performance of the Dow Jones Global Select Dividend Index.

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

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for FGD are 0.58%, which makes it one of the more expensive products in the space.

It's 12-month trailing dividend yield comes in at 6.67%.

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, Harvey Norman Holdings Limited (HVN.AU) accounts for about 1.74% of the fund's total assets, followed by Standard Life Aberdeen Plc (SLA.LN) and Csr Limited (CSR.AU).

Its top 10 holdings account for approximately 15.04% of FGD's total assets under management.

Performance and Risk

Year-to-date, the First Trust Dow Jones Global Select Dividend Index Fund has gained about 2.40% so far, and is down about -9.50% over the last 12 months (as of 08/29/2019). FGD has traded between $21.06 and $25.49 in this past 52-week period.

The ETF has a beta of 0.79 and standard deviation of 11.51% for the trailing three-year period, making it a low risk choice in the space. With about 99 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 $10.45 B in assets, Vanguard Total World Stock ETF has $12.08 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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