Should You Invest in the First Trust Consumer Discretionary AlphaDEX ETF (FXD)?
The First Trust Consumer Discretionary AlphaDEX ETF (FXD) was launched on 05/08/2007, and is a passively managed exchange traded fund designed to offer broad exposure to the Consumer Discretionary - Broad segment of the equity market.
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.
Investor-friendly, sector ETFs provide many options 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 9, placing it in bottom 44%.
Index Details
The fund is sponsored by First Trust Advisors. It has amassed assets over $300.97 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
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 0.64%, making it one of the most expensive products in the space.
It has a 12-month trailing dividend yield of 0.91%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. 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 77.40% of the portfolio. Telecom and Consumer Staples round out the top three.
Looking at individual holdings, Carvana Co. (CVNA) accounts for about 1.97% of total assets, followed by Roku, Inc. (ROKU) and Borgwarner Inc. (BWA).
The top 10 holdings account for about 16.28% of total assets under management.
Performance and Risk
Year-to-date, the First Trust Consumer Discretionary AlphaDEX ETF has added about 1.34% so far, and it's up approximately 10.65% over the last 12 months (as of 02/20/2020). FXD has traded between $39.84 and $45.94 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 119 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Consumer Discretionary AlphaDEX ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, FXD is a reasonable option for those seeking exposure to the Consumer Discretionary ETFs area of the market. Investors might also want to consider some other ETF options in the space.
Vanguard Consumer Discretionary ETF (VCR) tracks MSCI US Investable Market Consumer Discretionary 25/50 Index and the Consumer Discretionary Select Sector SPDR ETF (XLY) tracks Consumer Discretionary Select Sector Index. Vanguard Consumer Discretionary ETF has $3.32 B in assets, Consumer Discretionary Select Sector SPDR ETF has $15.57 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 ETF (FXD): ETF Research Reports
BorgWarner Inc. (BWA) : Free Stock Analysis Report
Vanguard Consumer Discretionary ETF (VCR): ETF Research Reports
Consumer Discretionary Select Sector SPDR ETF (XLY): ETF Research Reports
Roku, Inc. (ROKU) : Free Stock Analysis Report
Carvana Co. (CVNA) : Free Stock Analysis Report
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