A smart beta exchange traded fund, the First Trust Dow Jones Global Select Dividend Index Fund (FGD) debuted on 11/21/2007, and offers 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.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
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.
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.
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
FGD is managed by First Trust Advisors, and this fund has amassed over $524.70 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
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Annual operating expenses for FGD are 0.58%, which makes it one of the more expensive products in the space.
FGD's 12-month trailing dividend yield is 6.18%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
Looking at individual holdings, Morgan Stanley Institutional Liquidity Fund - Treasury Portfolio (MISXX) accounts for about 2.93% of total assets, followed by Standard Life Aberdeen Plc (SLA.LN) and Azimut Holding Spa (AZM.IM).
FGD's top 10 holdings account for about 16.05% of its total assets under management.
Performance and Risk
The ETF has gained about 10.31% so far this year and is down about -1.39% in the last one year (as of 07/16/2019). In the past 52-week period, it has traded between $21.06 and $25.54.
The fund has a beta of 0.80 and standard deviation of 11.28% for the trailing three-year period, which makes FGD a low risk choice in this particular space. With about 99 holdings, it effectively diversifies company-specific risk.
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 $10.94 B in assets, Vanguard Total World Stock ETF has $12.69 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.
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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