Exploring the Value of the First Trust Small Cap Growth ETF
Understanding the First Trust Small Cap Growth AlphaDEX ETF
Launched in April 2011, the First Trust Small Cap Growth AlphaDEX ETF (FYC) offers investors an innovative approach to gaining exposure in the small-cap growth market. As a smart beta ETF, FYC merges traditional index investing with active management strategies, allowing for a unique investment experience.
What Are Smart Beta ETFs?
Smart beta ETFs have emerged as an alternative to traditional market-cap-weighted funds. Many investors believe that with careful stock selection, it is possible to outperform the market. This belief is the foundation of smart beta investing, where funds track indexes based on specific factors other than just market capitalization.
These funds harness various strategies, such as equal-weighting or utilizing factors like value and momentum, to select stocks with potentially higher returns. While smart beta ETFs provide a wealth of options, investors should remain vigilant, as not all strategies yield the desired outcomes.
Fund Management and Index Overview
Managed by First Trust Advisors, the FYC ETF has successfully accumulated more than $328 million in assets. This positions it as a substantial player among small-cap growth ETFs. The ETF aims to replicate the performance of the Nasdaq AlphaDEX Small Cap Growth Index through its unique AlphaDEX stock selection model.
This comprehensive indexing methodology draws from the NASDAQ US 700 Small Cap Growth Index, allowing for focused investment in small-cap growth segments of the market.
Cost Analysis and Expenses
Investors should be aware that expense ratios play a crucial role in the long-term performance of investment products. FYC has a relatively high operating expense of 0.70%, which may impact returns compared to lower-cost alternatives.
Currently, the ETF's trailing dividend yield stands at 0.41%, making it an important consideration for income-focused investors.
Sector Breakdown and Top Holdings
While FYC provides diversified exposure, understanding the fund’s sector allocations is essential for evaluating its risk profile. The fund has a significant allocation of approximately 22.90% in the Healthcare sector, with Industrials and Information Technology also representing major segments.
Among its holdings, Adma Biologics, Inc. (ADMA) comprises around 0.92% of the total assets, trailed by Mirum Pharmaceuticals, Inc. (MIRM) and Zeta Global Holdings Corp. (class A) (ZETA). The top 10 positions together make up nearly 7.9% of the fund's assets, demonstrating a concentrated approach toward growth opportunities.
Performance Insights and Risk Assessment
In terms of performance, FYC has exhibited strong results, with an impressive gain of about 16.21% year-to-date and an approximate 25.24% increase over the past year. Throughout this period, the ETF has experienced price fluctuations between $51.50 and $73.05.
However, potential investors should note that FYC has a beta of 1.18 with a standard deviation of 24.03% over the trailing three years. This higher beta value indicates a greater volatility compared to the market, thus positioning FYC as a high-risk investment option in the small-cap growth category. The fund contains around 265 holdings, which helps mitigate company-specific risk effectively.
Looking at Alternatives
Although the First Trust Small Cap Growth AlphaDEX ETF presents compelling investment merits for those interested in the small-cap growth area, it's prudent to consider other alternatives. For instance, the iShares Russell 2000 Growth ETF (IWO) tracks the Russell 2000 Growth Index, presenting a different strategy for exposure. Similarly, the Vanguard Small-Cap Growth ETF (VBK) follows the CRSP U.S. Small Cap Growth Index, providing another option for investors.
Notably, IWO boasts $11.60 billion in assets under management and charges an expense ratio of 0.24%, while VBK has $17.61 billion and a lower fee of just 0.07%. These alternatives may appeal to cost-sensitive investors seeking lower-risk choices while aiming to maintain exposure to small-cap growth.
Frequently Asked Questions
What is the main strategy of the First Trust Small Cap Growth ETF?
The First Trust Small Cap Growth AlphaDEX ETF uses smart beta strategies to select stocks based on specific fundamental characteristics rather than solely on market capitalization.
How does FYC perform in comparison to similar ETFs?
FYC has shown strong performance, gaining around 16.21% year-to-date. However, investors should compare its expense ratios and risk profiles with other ETFs for a full analysis.
What are the primary sectors held by FYC?
FYC primarily invests in the Healthcare sector at approximately 22.90%, followed by significant allocations in Industrials and Information Technology.
Is the expense ratio of FYC competitive?
With an expense ratio of 0.70%, FYC is on the higher end compared to other small-cap growth ETFs, which could affect long-term returns.
Are there lower-cost alternatives to FYC?
Yes, alternatives such as the iShares Russell 2000 Growth ETF (IWO) and the Vanguard Small-Cap Growth ETF (VBK) offer lower expense ratios, enabling a cost-effective investment strategy.
About Investors Hangout
Investors Hangout is a leading online stock forum for financial discussion and learning, offering a wide range of free tools and resources. It draws in traders of all levels, who exchange market knowledge, investigate trading tactics, and keep an eye on industry developments in real time. Featuring financial articles, stock message boards, quotes, charts, company profiles, and live news updates. Through cooperative learning and a wealth of informational resources, it helps users from novices creating their first portfolios to experts honing their techniques. Join Investors Hangout today: https://investorshangout.com/
Disclaimer: The content of this article is solely for general informational purposes only; it does not represent legal, financial, or investment advice. Investors Hangout does not offer financial advice; the author is not a licensed financial advisor. Consult a qualified advisor before making any financial or investment decisions based on this article. The author's interpretation of publicly available data shapes the opinions presented here; as a result, they should not be taken as advice to purchase, sell, or hold any securities mentioned or any other investments. The author does not guarantee the accuracy, completeness, or timeliness of any material, providing it "as is." Information and market conditions may change; past performance is not indicative of future outcomes. If any of the material offered here is inaccurate, please contact us for corrections.
Related Articles
- Key Insights from the Latest Digital Lending Report by MeridianLink
- Analyzing the Bullish Trends for Philip Morris Intl Options
- Viasat's New Inducement Grants Fueling Growth in Satellite Tech
- Prospect Capital COO Boosts Confidence with Stock Purchase
- Excelerate Energy Achieves New 52-Week High Amid Growth
- Director's Strategic Share Purchase Highlights GABC's Growth
- First Farmers Financial Corp. Reports Historic Dividend Increase
- Irenic Capital Urges Kinaxis Board to Reassess Strategic Options
- Exploring the Strong Momentum of UniCredit for Ideal Investors
- Top Three Undervalued Stocks to Consider Purchasing Now
Recent Articles
- Uber's Growth Journey: A Closer Look at Technical Signals Ahead
- Century Communities Earns Spotlight on Newsweek's Trustworthy List 2024
- Lifecore Biomedical Investors: Key Steps for Legal Action
- Enhancing Fleet Safety with EROAD's New AI Dashcam Solution
- KT Capital Takes Strategic Step with Recycling Equipment Firm
- Kroger Launches Campaign to Support Food Insecurity Efforts
- Honoring Kylene Beers: A Remarkable Educator's Journey
- Organic Valley's Innovative Grazing Ads Highlight Sustainability
- Verrica Pharmaceuticals Experiences Stock Low, Future Prospects Ahead
- Banking Outlook: Can the 1995 Success Be Repeated?
- Altais Elevates Dr. Mauricio Bueno as Medical Leader in Care Network
- Middlesex Water Company Leaders to Join Virtual Conference
- Coinbase Faces Class Action: Key Allegations and Next Steps
- Ginkgo Bioworks and Google Cloud Revolutionize Drug Development
- Important Class Action Update for Methode Electronics Investors
- Altais Appoints Dr. Mauricio Bueno as Medical Director
- Upcoming Conference Participation by Middlesex Water Executives
- Innovative Oral Solution to Replace Antibiotics in Poultry
- Sam's Club's Wage Increase: A Smart Strategy for Retail Success
- Citigroup's Options Market Analysis Highlights Investor Sentiment
- Investing Insights: Viking Therapeutics' Bullish Options Activity
- Insights into the Bullish Trends for Apollo Global Management
- Exploring the Potential of Invesco Russell 1000 Equal Weight ETF
- Education Cannot Wait Provides Hope to 11 Million Children
- Consumer Outcry Over Rising Insurance Costs and Coverage Issues
- Clasp Secures $10 Million to Address Employment Challenges
- Majority of Americans Desire Year-Round Swimming with Warmer Water
- Enhanced Hurricane Insurance Coverage Available for Businesses
- Why Annual Flu Vaccination is Critical for Your Health
- Accenture Shares Stabilize as BofA Upholds Buy Rating
- Merit Medical’s Strategic Acquisition Draws Positive Analyst Attention
- CrowdStrike Unveils Financing Subsidiary for Cybersecurity Growth
- Rayonier Advanced Materials Achieves Remarkable Stock Milestone
- T2 Biosystems Faces Stock Challenges Amid New FDA Approvals
- U.S. Steel's CEO Assurance on Nippon Steel Acquisition
- Meta Introduces Enhanced Privacy Controls for Teen Instagram Accounts
- MicroStrategy's Latest Debt Offering to Boost Bitcoin Holdings
- Move Health and No Fear Counselling Unite for Greater Care
- Fairway Consulting Welcomes Brennan Clark as VP of Executive Search
- Empowering Teens with a Free AI Bootcamp Experience
- Ponke Soars to New Heights After Joining Revolut Platform
- Moderna's Stock Climbs After Health Canada's Vaccine Approval
- Fractal EMS and Gold Electronic Equipment Team Up for BMS
- Nufactor Achieves URAC Certification for Rare Disease Excellence
- Empowering Omaha Teens Through an Innovative AI Bootcamp
- Exploring Unity Software's Bullish Options Trend and Insights
- Insight into Trump's Media & Technology Options Activity
- Celsius Holdings: Whale Activity and Expert Insights Explained
- California Parents Rally Against CBD Ban Impacting Children
- Stoic Equity Partners Makes Key Acquisition in New Market