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Launched on 09/20/2016, the First Trust NASDAQ Food & Beverage ETF (FTXG) is a smart beta exchange traded fund offering broad exposure to the Consumer Staples ETFs category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
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.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
Because the fund has amassed over $805.69 million, this makes it one of the average sized ETFs in the Consumer Staples ETFs. FTXG is managed by First Trust Advisors. This particular fund seeks to match the performance of the Nasdaq US Smart Food & Beverage Index before fees and expenses.
The Nasdaq US Smart Food & Beverage Index is a modified factor weighted index, designed to provide exposure to US companies within the food and beverage industry.
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 0.60% for FTXG, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 1.61%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
For FTXG, it has heaviest allocation in the Consumer Staples sector --about 95.70% of the portfolio.
When you look at individual holdings, Archer-Daniels-Midland Company (ADM) accounts for about 8.95% of the fund's total assets, followed by Bunge Limited (BG) and Tyson Foods, Inc. (class A) (TSN).