Exploring the Strength of First Trust Mid Cap Growth ETF
Assessing First Trust Mid Cap Growth AlphaDEX ETF
The First Trust Mid Cap Growth AlphaDEX ETF (NASDAQ: FNY) has emerged as a noteworthy contender among ETFs since its introduction. This smart beta exchange-traded fund focuses on the mid-cap growth sector, offering investors unique opportunities in the market.
Understanding Smart Beta ETFs
Smart beta ETFs differ from traditional funds by employing investment strategies that go beyond standard market cap-weighted indexing. While market cap indexes reflect market efficiency and provide broad exposure at lower costs, smart beta seeks to outperform through selective stock picking based on specific characteristics.
These will often utilize non-cap weighted strategies that focus on superior risk-return profiles. Various methodologies are available within this category, including equal weight, fundamental weight, and those based on volatility or momentum. However, it's essential for investors to note that not all smart beta strategies guarantee superior performance.
Management and Fund Overview
Managed by First Trust Advisors, the FNY ETF has successfully gathered around $346.61 million in assets. As a moderately sized fund within its category, it aims to mirror the performance of the Nasdaq AlphaDEX Mid Cap Growth Index while minimizing fees.
The Nasdaq AlphaDEX Mid Cap Growth Index employs an advanced selection process to identify stocks that show potential for growth, which is distinct from purely market cap-weighted indexes.
Evaluating Costs and Expenses
Cost considerations are paramount for ETF investors. With an annual operating expense ratio of 0.70%, FNY is positioned as a high-cost product relative to competitors in its space. Nevertheless, the potential for long-term gains may justify the expenses for some investors.
Moreover, the ETF boasts a 12-month trailing dividend yield of 0.08%, providing a modest income stream.
Holdings and Sector Allocation
Investors should examine the underlying holdings of any ETF before investing. Transparency is a strong suit of most ETFs, including FNY, which regularly updates its holdings.
The fund allocates roughly 23.80% of its portfolio to the Industrials sector, with Consumer Discretionary and Healthcare following behind in weighting. Key individual holdings include Coca-Cola Consolidated Inc. (NASDAQ: COKE), making up about 0.86%, alongside Sprouts Farmers Market, Inc. (NASDAQ: SFM) and The Ensign Group, Inc. (NASDAQ: ENSG). The top ten holdings comprise approximately 8.31% of total assets.
Performance Metrics
FNY has shown notable performance, with year-to-date gains of about 16.13%. Over the past year, it has increased by 10.69%. Throughout the last 52 weeks, the ETF has fluctuated between a low of $55.49 and a high of $77.95.
In terms of risk, FNY has a beta of 1.14, indicating a higher level of volatility compared to the market. The standard deviation of 22.52% for the trailing three-year period positions it as a medium-risk investment. With 226 individual stocks, the fund effectively reduces specific company risks.
Other Investment Options
While the First Trust Mid Cap Growth AlphaDEX ETF presents an enticing option for investors aiming to exceed the typical mid-cap growth benchmarks, it’s vital to explore alternative ETFs that may better suit individual investment strategies.
For example, the Vanguard Mid-Cap Growth ETF (NYSE: VOT) closely tracks its respective index and has amassed $13.39 billion in assets. Likewise, the iShares Russell Mid-Cap Growth ETF (NYSE: IWP) holds $14.07 billion. Both alternatives feature lower expense ratios: VOT at 0.07%, and IWP at 0.23%, making them more cost-effective choices for prospective investors.
Frequently Asked Questions
What is the First Trust Mid Cap Growth AlphaDEX ETF?
The First Trust Mid Cap Growth AlphaDEX ETF (FNY) is a smart beta fund focusing on mid-cap growth stocks, providing investors with broader market exposure.
How does FNY perform relative to its peers?
FNY has shown solid performance, particularly with a 10.69% increase over the past year and 16.13% year-to-date.
What are the costs associated with investing in FNY?
The ETF has an annual operating expense of 0.70%, which is higher compared to other options in the same category.
What sectors does FNY primarily invest in?
Industrials, Consumer Discretionary, and Healthcare are the top sectors represented in FNY's portfolio.
Are there alternatives to the First Trust Mid Cap Growth ETF?
Yes, investors might consider options like Vanguard Mid-Cap Growth ETF (VOT) and iShares Russell Mid-Cap Growth ETF (IWP) for potentially lower fees and different strategies.
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