If you're interested in broad exposure to the Consumer Discretionary - Broad segment of the equity market, look no further than the First Trust Consumer Discretionary AlphaDEX Fund (FXD), a passively managed exchange traded fund launched on 05/08/2007.
While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.
Sector ETFs also provide investors access to a broad group of companies in particular sectors that offer low risk and diversified exposure. Consumer Discretionary - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 11, placing it in bottom 31%.
The fund is sponsored by First Trust Advisors. It has amassed assets over $330.32 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.
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 1.07%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, 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 79.20% of the portfolio. Telecom and Industrials round out the top three.
Looking at individual holdings, Carvana Co. (CVNA) accounts for about 1.77% of total assets, followed by Roku, Inc. (ROKU) and Pultegroup, Inc. (PHM).
The top 10 holdings account for about 16.07% of total assets under management.
Performance and Risk
Year-to-date, the First Trust Consumer Discretionary AlphaDEX Fund has gained about 10.78% so far, and is down about -2.44% over the last 12 months (as of 10/09/2019). 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 14.66% 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.
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 excellent 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 $3.02 B in assets, Consumer Discretionary Select Sector SPDR Fund has $13.67 B. VCR has an expense ratio of 0.10% and XLY charges 0.13%.
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
PulteGroup, Inc. (PHM) : Free Stock Analysis Report
Consumer Discretionary Select Sector SPDR Fund (XLY): ETF Research Reports
Vanguard Consumer Discretionary ETF (VCR): ETF Research Reports
Roku, Inc. (ROKU) : Free Stock Analysis Report
Carvana Co. (CVNA) : Free Stock Analysis Report
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