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Should You Invest in the First Trust Consumer Discretionary AlphaDEX Fund (FXD)?

Zacks Equity Research

Looking for broad exposure to the Consumer Discretionary - Broad segment of the equity market? You should consider the First Trust Consumer Discretionary AlphaDEX Fund (FXD), a passively managed exchange traded fund launched on 05/08/2007.

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

Sector ETFs are also funds of convenience, offering many ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Consumer Discretionary - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 12, placing it in bottom 25%.

Index Details

The fund is sponsored by First Trust Advisors. It has amassed assets over $340.38 M, making it one of the larger ETFs attempting to match the performance of the Consumer Discretionary - Broad segment of the equity market. FXD seeks to match the performance of the StrataQuant Consumer Discretionary Index before fees and expenses.

The StrataQuant Consumer Discretionary Index employs the AlphaDEX stock selection methodology to select stocks from the Russell 1000 Index.

Costs

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for this ETF are 0.64%, making it one of the more expensive products in the space.

It has a 12-month trailing dividend yield of 0.57%.

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.

This ETF has heaviest allocation in the Consumer Discretionary sector--about 78.40% of the portfolio. Telecom and Industrials round out the top three.

Looking at individual holdings, Roku, Inc. (ROKU) accounts for about 2.35% of total assets, followed by Carvana Co. (CVNA) and Urban Outfitters, Inc. (URBN).

The top 10 holdings account for about 16.63% of total assets under management.

Performance and Risk

Year-to-date, the First Trust Consumer Discretionary AlphaDEX Fund has added roughly 17.96% so far, and is down about -0.43% over the last 12 months (as of 09/17/2019). FXD has traded between $34.86 and $44.45 in this past 52-week period.

The ETF has a beta of 1.03 and standard deviation of 14.59% for the trailing three-year period, making it a medium risk choice in the space. With about 120 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust Consumer Discretionary AlphaDEX Fund holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, FXD is an outstanding option for investors seeking exposure to the Consumer Discretionary ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

Vanguard Consumer Discretionary ETF (VCR) tracks MSCI US Investable Market Consumer Discretionary 25/50 Index and the Consumer Discretionary Select Sector SPDR Fund (XLY) tracks Consumer Discretionary Select Sector Index. Vanguard Consumer Discretionary ETF has $3.17 B in assets, Consumer Discretionary Select Sector SPDR Fund has $14.21 B. VCR has an expense ratio of 0.10% and XLY charges 0.13%.

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 Consumer Discretionary AlphaDEX Fund (FXD): ETF Research Reports
 
Consumer Discretionary Select Sector SPDR Fund (XLY): ETF Research Reports
 
Vanguard Consumer Discretionary ETF (VCR): ETF Research Reports
 
Urban Outfitters, Inc. (URBN) : Free Stock Analysis Report
 
Carvana Co. (CVNA) : Free Stock Analysis Report
 
Roku, Inc. (ROKU) : Free Stock Analysis Report
 
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