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Should First Trust Small Cap Core AlphaDEX ETF (FYX) Be on Your Investing Radar?

Designed to provide broad exposure to the Small Cap Blend segment of the US equity market, the First Trust Small Cap Core AlphaDEX ETF (FYX) is a passively managed exchange traded fund launched on 05/08/2007.

The fund is sponsored by First Trust Advisors. It has amassed assets over $745.85 million, making it one of the average sized ETFs attempting to match the Small Cap Blend segment of the US equity market.

Why Small Cap Blend

Sitting at a market capitalization below $2 billion, small cap companies tend to be high-potential stocks compared to its large and mid cap counterparts, but come with higher risk.

Blend ETFs usually hold a mix of growth and value stocks as well as stocks that exhibit both value and growth characteristics.

Costs

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.

Annual operating expenses for this ETF are 0.61%, making it one of the most expensive products in the space.

It has a 12-month trailing dividend yield of 1.23%.

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 to the Financials sector--about 23.50% of the portfolio. Industrials and Consumer Discretionary round out the top three.

Looking at individual holdings, Global Blood Therapeutics, Inc. (GBT) accounts for about 0.46% of total assets, followed by Atlas Air Worldwide Holdings, Inc. (AAWW) and Comstock Resources, Inc. (CRK).

The top 10 holdings account for about 3.93% of total assets under management.

Performance and Risk

FYX seeks to match the performance of the Nasdaq AlphaDEX Small Cap Core Index before fees and expenses. 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.

The ETF has lost about -23.01% so far this year and is down about -17.98% in the last one year (as of 09/29/2022). In the past 52-week period, it has traded between $72.76 and $101.

The ETF has a beta of 1.26 and standard deviation of 32.88% for the trailing three-year period, making it 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 carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, FYX is a good option for those seeking exposure to the Style Box - Small Cap Blend area of the market. Investors might also want to consider some other ETF options in the space.

The iShares Russell 2000 ETF (IWM) and the iShares Core S&P SmallCap ETF (IJR) track a similar index. While iShares Russell 2000 ETF has $48.87 billion in assets, iShares Core S&P SmallCap ETF has $60.39 billion. IWM has an expense ratio of 0.19% and IJR charges 0.06%.

Bottom-Line

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

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
 
Comstock Resources, Inc. (CRK): Free Stock Analysis Report
 
Atlas Air Worldwide Holdings (AAWW): Free Stock Analysis Report
 
iShares Russell 2000 ETF (IWM): ETF Research Reports
 
Global Blood Therapeutics, Inc. (GBT): Free Stock Analysis Report
 
iShares Core S&P SmallCap ETF (IJR): ETF Research Reports
 
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