Making its debut on 11/21/2007, smart beta exchange traded fund First Trust Dow Jones Global Select Dividend Index Fund (FGD) provides investors 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.
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.
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 $458.26 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
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Annual operating expenses for FGD are 0.58%, which makes it one of the more expensive products in the space.
The fund has a 12-month trailing dividend yield of 4.76%.
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.
When you look at individual holdings, Centurylink, Inc. (CTL) accounts for about 2.53% of the fund's total assets, followed by Galliford Try Plc (GFRD.LN) and Element Fleet Management Corp. (EFN.CT).
Its top 10 holdings account for approximately 16.89% of FGD's total assets under management.
Performance and Risk
Year-to-date, the First Trust Dow Jones Global Select Dividend Index Fund has lost about -5.85% so far, and is down about -1.65% over the last 12 months (as of 11/15/2018). FGD has traded between $23.11 and $28.07 in this past 52-week period.
The ETF has a beta of 0.82 and standard deviation of 13.85% for the trailing three-year period, making it a low risk choice in the space. With about 101 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 $8.96 B in assets, Vanguard Total World Stock ETF has $11.39 B. ACWI has an expense ratio of 0.32% 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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FT-DJ GL SEL DV (FGD): ETF Research Reports
ISHRS-MSCI ACWI (ACWI): ETF Research Reports
CenturyLink, Inc. (CTL) : Free Stock Analysis Report
VANGD-TOT W STK (VT): ETF Research Reports
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