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Designed to provide broad exposure to the Consumer Discretionary - Broad segment of the equity market, the First Trust Consumer Discretionary AlphaDEX ETF (FXD) is a passively managed exchange traded fund launched on 05/08/2007.
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.
Sector ETFs are also funds of convenience, offering many ways 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 12, placing it in bottom 25%.
Index Details
The fund is sponsored by First Trust Advisors. It has amassed assets over $1.16 billion, making it one of the largest 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
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.
Annual operating expenses for this ETF are 0.64%, making it one of the more expensive products in the space.
It has a 12-month trailing dividend yield of 0.64%.
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.
This ETF has heaviest allocation in the Consumer Discretionary sector--about 71.80% of the portfolio. Industrials and Telecom round out the top three.
Looking at individual holdings, Peloton Interactive, Inc. (class A) (PTON) accounts for about 1.80% of total assets, followed by Etsy, Inc. (ETSY) and The Trade Desk, Inc. (class A) (TTD).
The top 10 holdings account for about 15.48% of total assets under management.
Performance and Risk
So far this year, FXD has added about 1.01%, and was up about 5.15% in the last one year (as of 11/08/2020). During this past 52-week period, the fund has traded between $23.18 and $45.94.
The ETF has a beta of 1.44 and standard deviation of 29.57% for the trailing three-year period, making it a medium risk choice in the space. With about 117 holdings, it effectively diversifies company-specific risk.