Is First Trust Dow 30 Equal Weight ETF (EDOW) a Strong ETF Right Now?
Making its debut on 08/08/2017, smart beta exchange traded fund First Trust Dow 30 Equal Weight ETF (EDOW) provides investors broad exposure to the Style Box - Large Cap Blend category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
Because the fund has amassed over $218.62 million, this makes it one of the average sized ETFs in the Style Box - Large Cap Blend. EDOW is managed by First Trust Advisors. This particular fund seeks to match the performance of the Dow Jones Industrial Average Equal Weight Index before fees and expenses.
The Dow Jones Industrial Average Equal Weight Index is an equally weighted index designed to be a price neutral version of the price-weighted DJIA.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Operating expenses on an annual basis are 0.50% for EDOW, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.84%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
Representing 19.80% of the portfolio, the fund has heaviest allocation to the Information Technology sector; Financials and Industrials round out the top three.
Looking at individual holdings, 3m Company (MMM) accounts for about 4.17% of total assets, followed by Unitedhealth Group Incorporated (UNH) and International Business Machines Corporation (IBM).
Its top 10 holdings account for approximately 37.26% of EDOW's total assets under management.
Performance and Risk
Year-to-date, the First Trust Dow 30 Equal Weight ETF return is roughly 10.41% so far, and is up about 26.51% over the last 12 months (as of 10/04/2024). EDOW has traded between $28.08 and $36.10 in this past 52-week period.
EDOW has a beta of 0.90 and standard deviation of 14.39% for the trailing three-year period. With about 31 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust Dow 30 Equal Weight ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Core S&P 500 ETF (IVV) tracks S&P 500 Index and the SPDR S&P 500 ETF (SPY) tracks S&P 500 Index. IShares Core S&P 500 ETF has $525.90 billion in assets, SPDR S&P 500 ETF has $581.96 billion. IVV has an expense ratio of 0.03% and SPY charges 0.09%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Blend.
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 Dow 30 Equal Weight ETF (EDOW): ETF Research Reports
UnitedHealth Group Incorporated (UNH) : Free Stock Analysis Report
International Business Machines Corporation (IBM) : Free Stock Analysis Report
3M Company (MMM) : Free Stock Analysis Report
SPDR S&P 500 ETF (SPY): ETF Research Reports
iShares Core S&P 500 ETF (IVV): ETF Research Reports