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

Sweta Killa

The First Trust Dow Jones Global Select Dividend Index Fund (FGD) made its debut on 11/21/2007, and is a smart beta exchange traded fund that provides broad exposure to the Broad Developed World ETFs category of the market.

What Are Smart Beta ETFs?

Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.

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.

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.

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

Managed by First Trust Advisors, FGD has amassed assets over $513.73 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

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 this ETF are 0.58%, making it one of the more expensive products in the space.

It has a 12-month trailing dividend yield of 5.37%.

Sector Exposure and Top Holdings

Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.

When you look at individual holdings, Gamestop Corp. (class A) (GME) accounts for about 1.80% of the fund's total assets, followed by Standard Life Aberdeen Plc (SLA.LN) and Harvey Norman Holdings Limited (HVN.AU).

The top 10 holdings account for about 14.16% of total assets under management.

Performance and Risk

The ETF has gained about 10.05% so far this year and is down about -2.82% in the last one year (as of 04/12/2019). In the past 52-week period, it has traded between $21.06 and $26.44.

The fund has a beta of 0.79 and standard deviation of 12.93% for the trailing three-year period, which makes FGD a low risk choice in this particular space. With about 101 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 $10.63 B in assets, Vanguard Total World Stock ETF has $13.13 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
 
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Vanguard Total World Stock ETF (VT): ETF Research Reports
 
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