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

Zacks Equity Research

The First Trust Dow Jones Global Select Dividend ETF (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?

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.

Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.

However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.

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

The fund is sponsored by First Trust Advisors. It has amassed assets over $376.82 million, making 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

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.

Operating expenses on an annual basis are 0.59% for this ETF, which makes it one of the more expensive products in the space.

FGD's 12-month trailing dividend yield is 10.01%.

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, Be Semiconductor Industries N.v. (BESI.NA) accounts for about 2.27% of total assets, followed by Jb Hi-Fi Limited (JBH.AU) and Standard Life Aberdeen Plc (SLA.LN).

The top 10 holdings account for about 17.78% of total assets under management.

Performance and Risk

Year-to-date, the First Trust Dow Jones Global Select Dividend ETF has lost about -31.58% so far, and is down about -23.91% over the last 12 months (as of 05/04/2020). FGD has traded between $13.90 and $25.20 in this past 52-week period.

The fund has a beta of 0.99 and standard deviation of 21.80% 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 a reasonable option for investors seeking to outperform the Broad Developed World ETFs segment of the market. However, there are other ETFs in the space which investors could 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 $11.01 billion in assets, Vanguard Total World Stock ETF has $12.24 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
 
iShares MSCI ACWI ETF (ACWI): ETF Research Reports
 
Vanguard Total World Stock ETF (VT): ETF Research Reports
 
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