Should You Invest in the First Trust Consumer Discretionary AlphaDEX Fund (FXD)?
Looking for broad exposure to the Consumer Discretionary - Broad segment of the U.S. equity market? You should consider 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 7, placing it in top 44%.
Index Details
The fund is sponsored by First Trust Advisors. It has amassed assets over $507.21 M, making it one of the larger ETFs attempting to match the performance of the Consumer Discretionary - Broad segment of the U.S. 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
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Annual operating expenses for this ETF are 0.63%, making it the most expensive product in the space.
It has a 12-month trailing dividend yield of 0.91%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. 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 93.60% of the portfolio.
Looking at individual holdings, Dick's Sporting Goods, Inc. (DKS) accounts for about 1.73% of total assets, followed by Kohl's Corporation (KSS) and Ebay Inc. (EBAY).
The top 10 holdings account for about 15.75% of total assets under management.
Performance and Risk
Year-to-date, the First Trust Consumer Discretionary AlphaDEX Fund has lost about -2.33% so far, and was up about 14.11% over the last 12 months (as of 04/09/2018). FXD has traded between $35.75 and $45.22 in this past 52-week period.
The ETF has a beta of 1.04 and standard deviation of 14.86% for the trailing three-year period, making it a medium risk choice in the space. With about 114 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 a great 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 $2.53 B in assets, Consumer Discretionary Select Sector SPDR Fund has $12.87 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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eBay Inc. (EBAY) : Free Stock Analysis Report
SPDR-CONS DISCR (XLY): ETF Research Reports
VIPERS-CONS DIS (VCR): ETF Research Reports
FT-CONSUMR DIS (FXD): ETF Research Reports
DICK'S Sporting Goods, Inc. (DKS) : Free Stock Analysis Report
Kohl's Corporation (KSS) : Free Stock Analysis Report
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