Is First Trust Dow Jones Global Select Dividend ETF (FGD) a Strong ETF Right Now?

Launched on 11/21/2007, the First Trust Dow Jones Global Select Dividend ETF (FGD) is a smart beta exchange traded fund offering broad exposure to the Broad Developed World ETFs category of the market.

What Are Smart Beta ETFs?

The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.

A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.

However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.

This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of 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

The fund is managed by First Trust Advisors, and has been able to amass over $380.01 million, which makes it one of the average sized ETFs in the Broad Developed World ETFs. This particular fund, before fees and expenses, seeks to match the performance of the Dow Jones Global Select Dividend Index.

This Index is an indicated annual dividend yield weighted index of 100 stocks selected from the developed-market portion of the Dow Jones World Index.

Cost & Other Expenses

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

With one of the more expensive products in the space, this ETF has annual operating expenses of 0.59%.

FGD's 12-month trailing dividend yield is 7.02%.

Sector Exposure and Top Holdings

Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.

Taking into account individual holdings, Us Dollar ($USD) accounts for about 5.56% of the fund's total assets, followed by Bankia, S.a. (BKIA.SM) and Eni Spa (ENI.IM).

FGD's top 10 holdings account for about 18.2% of its total assets under management.

Performance and Risk

The ETF has lost about -24.76% and is down about -17.17% so far this year and in the past one year (as of 07/14/2020), respectively. FGD has traded between $13.90 and $25.20 during this last 52-week period.

FGD has a beta of 0.99 and standard deviation of 23.60% for the trailing three-year period, which makes the fund a low risk choice in the space. With about 96 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust Dow Jones Global Select Dividend ETF is a reasonable option for investors seeking to outperform the Broad Developed World ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

IShares MSCI ACWI ETF (ACWI) tracks MSCI All Country World Index and the Vanguard Total World Stock ETF (VT) tracks FTSE Global All Cap Index. IShares MSCI ACWI ETF has $11.58 billion in assets, Vanguard Total World Stock ETF has $13.65 billion. ACWI has an expense ratio of 0.32% and VT charges 0.08%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Broad Developed World ETFs.

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 Dow Jones Global Select Dividend ETF (FGD): ETF Research Reports
 
iShares MSCI ACWI ETF (ACWI): ETF Research Reports
 
Vanguard Total World Stock ETF (VT): ETF Research Reports
 
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