Launched on 11/21/2007, the First Trust Dow Jones Global Select Dividend Index Fund (FGD) is a smart beta exchange traded fund offering 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.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
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.
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.
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 $522.10 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
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 5.40%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
Taking into account individual holdings, Standard Life Aberdeen Plc (SLA.LN) accounts for about 1.71% of the fund's total assets, followed by Gamestop Corp. (class A) (GME) and Intesa Sanpaolo Spa (ISP.IM).
FGD's top 10 holdings account for about 14.2% of its total assets under management.
Performance and Risk
So far this year, FGD has added about 9.54%, and is down about -4.10% in the last one year (as of 05/07/2019). During this past 52-week period, the fund has traded between $21.06 and $26.43.
The fund has a beta of 0.80 and standard deviation of 12.81% 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.
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 $10.71 B in assets, Vanguard Total World Stock ETF has $12.67 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.
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
GameStop Corp. (GME) : Free Stock Analysis Report
Vanguard Total World Stock ETF (VT): ETF Research Reports
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