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The First Trust NASDAQ Semiconductor ETF (FTXL) made its debut on 09/20/2016, and is a smart beta exchange traded fund that provides broad exposure to the Technology ETFs 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.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide 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.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
Because the fund has amassed over $254.15 million, this makes it one of the average sized ETFs in the Technology ETFs. FTXL is managed by First Trust Advisors. FTXL seeks to match the performance of the Nasdaq US Smart Semiconductor Index before fees and expenses.
The Nasdaq US Smart Semiconductor Index is a modified factor weighted index, designed to provide exposure to US companies within the semiconductor 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.
Annual operating expenses for FTXL are 0.60%, which makes it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 0.58%.
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 FTXL, it has heaviest allocation in the Information Technology sector --about 100% of the portfolio.
Looking at individual holdings, Broadcom Inc. (AVGO) accounts for about 11.73% of total assets, followed by Nvidia Corporation (NVDA) and Qualcomm Incorporated (QCOM).