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?
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.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well 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.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
The fund is managed by First Trust Advisors. FGD has been able to amass assets over $464 M, 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
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Annual operating expenses for this ETF are 0.58%, making it one of the more expensive products in the space.
FGD's 12-month trailing dividend yield is 5.54%.
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, Centurylink, Inc. (CTL) accounts for about 2.23% of total assets, followed by Gamestop Corp. (class A) (GME) and Element Fleet Management Corp. (EFN.CT).
The top 10 holdings account for about 16.83% of total assets under management.
Performance and Risk
The ETF has gained about 6.13% so far this year and is down about -11.67% in the last one year (as of 01/24/2019). In the past 52-week period, it has traded between $21.06 and $28.07.
The ETF has a beta of 0.81 and standard deviation of 13.70% for the trailing three-year period, making it a low risk choice in the space. With about 102 holdings, it effectively diversifies company-specific risk.
First Trust Dow Jones Global Select Dividend Index Fund 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 $10.79 B in assets, Vanguard Total World Stock ETF has $12.46 B. ACWI has an expense ratio of 0.31% and VT charges 0.10%.
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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iShares MSCI ACWI ETF (ACWI): ETF Research Reports
Vanguard Total World Stock ETF (VT): ETF Research Reports
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