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Making its debut on 11/21/2007, smart beta exchange traded fund First Trust Dow Jones Global Select Dividend ETF (FGD) provides investors broad exposure to the Broad Developed World ETFs category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
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.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
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 managed by First Trust Advisors. FGD has been able to amass assets over $565.24 M, making it one of the average sized ETFs in the Broad Developed World ETFs. This particular fund, before fees and expenses, 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
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Operating expenses on an annual basis are 0.58% for FGD, making it one of the more expensive products in the space.
FGD's 12-month trailing dividend yield is 5.84%.
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.
Taking into account individual holdings, Standard Life Aberdeen Plc (SLA.LN) accounts for about 2% of the fund's total assets, followed by Azimut Holding Spa (AZM.IM) and Be Semiconductor Industries N.v. (BESI.NA).
Its top 10 holdings account for approximately 17.07% of FGD's total assets under management.
Performance and Risk
So far this year, FGD has lost about -10.98%, and is down about -1.15% in the last one year (as of 02/28/2020). During this past 52-week period, the fund has traded between $21.13 and $25.20.
The fund has a beta of 0.82 and standard deviation of 12.04% for the trailing three-year period, which makes FGD a low risk choice in this particular space. With about 98 holdings, it effectively diversifies company-specific risk.
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 $9.35 B in assets, Vanguard Total World Stock ETF has $12.78 B. ACWI has an expense ratio of 0.32% 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 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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