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?
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.
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.
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.
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.
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 sponsored by First Trust Advisors. It has amassed assets over $490.50 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.
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 6.61%.
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.
Taking into account individual holdings, Standard Life Aberdeen Plc (SLA.LN) accounts for about 1.90% of the fund's total assets, followed by Csr Limited (CSR.AU) and Harvey Norman Holdings Limited (HVN.AU).
FGD's top 10 holdings account for about 15.07% of its total assets under management.
Performance and Risk
So far this year, FGD has added roughly 3.36%, and is down about -7.66% in the last one year (as of 08/07/2019). During this past 52-week period, the fund has traded between $21.06 and $25.54.
The ETF has a beta of 0.79 and standard deviation of 11.25% for the trailing three-year period, making it a low risk choice in the space. With about 99 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 $10.45 B in assets, Vanguard Total World Stock ETF has $12.07 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
Vanguard Total World Stock ETF (VT): ETF Research Reports
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