Making its debut on 09/12/2016, smart beta exchange traded fund Fidelity High Dividend ETF (FDVV) provides investors broad exposure to the Style Box - All Cap Value category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
A good option for investors who believe in market efficiency, market cap weighted indexes offer 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.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
Managed by Fidelity, FDVV has amassed assets over $1.27 billion, making it one of the largest ETFs in the Style Box - All Cap Value. Before fees and expenses, FDVV seeks to match the performance of the Fidelity Core Dividend Index.
The Fidelity High Dividend Index reflects the performance of stocks of large and mid-capitalization high-dividend-paying companies that are expected to continue to pay and grow their dividends.
Cost & Other Expenses
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Operating expenses on an annual basis are 0.29% for this ETF, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 2.75%.
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.
FDVV's heaviest allocation is in the Information Technology sector, which is about 19.80% of the portfolio. Its Financials and Energy round out the top three.
Taking into account individual holdings, Apple Inc Common Stock Usd.00001 (AAPL) accounts for about 5.16% of the fund's total assets, followed by Microsoft Corp Common Stock Usd.00000625 (MSFT) and Chevron Corp Common Stock Usd.75 (CVX).