Should You Invest in the First Trust NASDAQ Semiconductor ETF (FTXL)?

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If you're interested in broad exposure to the Technology - Semiconductors segment of the equity market, look no further than the First Trust NASDAQ Semiconductor ETF (FTXL), a passively managed exchange traded fund launched on 09/20/2016.

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.

Investor-friendly, sector ETFs provide many options to gain low risk and diversified exposure to a broad group of companies in particular sectors. Technology - Semiconductors is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 7, placing it in top 44%.

Index Details

The fund is sponsored by First Trust Advisors. It has amassed assets over $1.47 billion, making it one of the larger ETFs attempting to match the performance of the Technology - Semiconductors segment of the equity market. 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.

Costs

When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.

Annual operating expenses for this ETF are 0.60%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 0.53%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Information Technology sector--about 100% of the portfolio.

Looking at individual holdings, Nvidia Corporation (NVDA) accounts for about 11.16% of total assets, followed by Broadcom Inc. (AVGO) and Qualcomm Incorporated (QCOM).

The top 10 holdings account for about 62.14% of total assets under management.

Performance and Risk

Year-to-date, the First Trust NASDAQ Semiconductor ETF has gained about 16.35% so far, and is up about 35.56% over the last 12 months (as of 08/26/2024). FTXL has traded between $62.18 and $107.11 in this past 52-week period.

The ETF has a beta of 1.26 and standard deviation of 34.21% for the trailing three-year period. With about 32 holdings, it has more concentrated exposure than peers.

Alternatives

First Trust NASDAQ Semiconductor ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, FTXL is an excellent option for investors seeking exposure to the Technology ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

IShares Semiconductor ETF (SOXX) tracks PHLX SOX Semiconductor Sector Index and the VanEck Semiconductor ETF (SMH) tracks MVIS US Listed Semiconductor 25 Index. IShares Semiconductor ETF has $15.14 billion in assets, VanEck Semiconductor ETF has $22.89 billion. SOXX has an expense ratio of 0.35% and SMH charges 0.35%.

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 NASDAQ Semiconductor ETF (FTXL): ETF Research Reports

QUALCOMM Incorporated (QCOM) : Free Stock Analysis Report

NVIDIA Corporation (NVDA) : Free Stock Analysis Report

Broadcom Inc. (AVGO) : Free Stock Analysis Report

VanEck Semiconductor ETF (SMH): ETF Research Reports

iShares Semiconductor ETF (SOXX): ETF Research Reports

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