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Is First Trust Small Cap Core AlphaDEX ETF (FYX) a Strong ETF Right Now?

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The First Trust Small Cap Core AlphaDEX ETF (FYX) made its debut on 05/08/2007, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - Small Cap Blend 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.

Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.

If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.

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.

The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.

Fund Sponsor & Index

The fund is sponsored by First Trust Advisors. It has amassed assets over $832.33 million, making it one of the average sized ETFs in the Style Box - Small Cap Blend. Before fees and expenses, this particular fund seeks to match the performance of the Nasdaq AlphaDEX Small Cap Core Index.

The NASDAQ AlphaDEX Small Cap Core Index is an enhanced index which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 700 Small Cap Index.

Cost & Other Expenses

For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.

Operating expenses on an annual basis are 0.61% for FYX, making it one of the most expensive products in the space.

It has a 12-month trailing dividend yield of 1.15%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Financials sector - about 23.30% of the portfolio. Industrials and Consumer Discretionary round out the top three.

Looking at individual holdings, Lantheus Holdings, Inc. (LNTH) accounts for about 0.50% of total assets, followed by Pdc Energy, Inc. (PDCE) and Renewable Energy Group, Inc. (REGI).

Its top 10 holdings account for approximately 4.44% of FYX's total assets under management.

Performance and Risk

Year-to-date, the First Trust Small Cap Core AlphaDEX ETF has lost about -13.58% so far, and is down about -8.51% over the last 12 months (as of 05/18/2022). FYX has traded between $79.22 and $101 in this past 52-week period.

FYX has a beta of 1.28 and standard deviation of 32.26% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 526 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust Small Cap Core AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - Small Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.

IShares Russell 2000 ETF (IWM) tracks Russell 2000 Index and the iShares Core S&P SmallCap ETF (IJR) tracks S&P SmallCap 600 Index. IShares Russell 2000 ETF has $54.49 billion in assets, iShares Core S&P SmallCap ETF has $66.24 billion. IWM has an expense ratio of 0.19% and IJR charges 0.06%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Small Cap Blend.

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 Small Cap Core AlphaDEX ETF (FYX): ETF Research Reports
 
PDC Energy, Inc. (PDCE) : Free Stock Analysis Report
 
Renewable Energy Group, Inc. (REGI) : Free Stock Analysis Report
 
iShares Russell 2000 ETF (IWM): ETF Research Reports
 
Lantheus Holdings, Inc. (LNTH) : Free Stock Analysis Report
 
iShares Core S&P SmallCap ETF (IJR): ETF Research Reports
 
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