First Trust Consumer Discretionary AlphaDEX® Fund (FXD)

Overview

The First Trust Consumer Discretionary AlphaDEXu00ae Fund (FXD) seeks investment results that correspond to the performance of an equity index called the StrataQuantu00ae Consumer Discretionary Index. The fund uses the AlphaDEXu00ae stock selection methodology to identify stocks within the consumer discretionary sector that may offer superior risk-adjusted returns.

Reputation and Reliability

First Trust is a well-established ETF issuer with a reputation for innovation and offering differentiated investment strategies.

Management Expertise

First Trust Advisors L.P. has a team of experienced investment professionals managing its ETF lineup.

Goal

Seeks investment results that correspond to the price and yield of the StrataQuantu00ae Consumer Discretionary Index.

Investment Approach and Strategy

Strategy: The fund uses a quantitative, rules-based approach (AlphaDEXu00ae) to select and weight stocks based on growth factors, value factors and momentum factors.

Composition Primarily holds stocks of U.S. consumer discretionary companies across market capitalizations.

Market Share: FXD's market share within the consumer discretionary ETF sector is moderate but significant.

Total Net Assets (AUM): 176159040

Key Competitors

• XLY
• VCR
• RCD

Competitive Landscape

The consumer discretionary ETF market is dominated by large, passively managed ETFs like XLY and VCR. FXD differentiates itself through its active, quantitative approach which may lead to outperformance (or underperformance) relative to passively managed indexes. The fund's AlphaDEXu00ae strategy can be an advantage or disadvantage depending on market conditions. The smaller market share compared to XLY and VCR highlights that investors generally prefer passively-managed investment strategy.

Historical Performance: Historical performance data is available from various financial data providers.

Benchmark Comparison: The ETF's performance should be compared to the StrataQuantu00ae Consumer Discretionary Index to assess its tracking effectiveness.

Expense Ratio: 0.63

Average Trading Volume

The average trading volume for FXD is moderate, indicating reasonable liquidity.

Bid-Ask Spread

The bid-ask spread for FXD is typically narrow, implying lower trading costs.

Market Environment Factors

Consumer spending, economic growth, interest rates, and consumer confidence are key market environment factors that influence the performance of consumer discretionary companies and FXD.

Growth Trajectory

The growth trajectory of FXD depends on the performance of the consumer discretionary sector and the effectiveness of the AlphaDEXu00ae strategy in identifying and weighting high-potential stocks. Changes in the AlphaDEXu00ae methodology or the composition of the underlying index could impact its future performance.

Competitive Edge

FXD's competitive edge lies in its use of the AlphaDEXu00ae methodology, a quantitative stock selection process that aims to identify stocks with strong growth and value characteristics. This differentiated approach seeks to outperform traditional market-cap weighted indexes. The fund targets companies within the consumer discretionary sector by employing a unique strategy of selecting stocks based on multiple factors, like value, growth, and momentum, to optimize return. The active strategy can potentially mitigate risk during market downturns due to its dynamic composition.

Volatility

The volatility of FXD is generally comparable to other consumer discretionary ETFs.

Market Risk

FXD is subject to market risk, sector risk (exposure to the consumer discretionary sector), and the risk that the AlphaDEXu00ae strategy may not perform as expected.

Ideal Investor Profile

The ideal investor for FXD is one who seeks exposure to the consumer discretionary sector with the potential for outperformance through an actively managed, quantitative strategy.

Market Risk

FXD may be suitable for investors who are comfortable with moderate risk and seek to diversify their portfolio with a sector-specific ETF that uses an active management approach. It is not suited for passive index followers.

The First Trust Consumer Discretionary AlphaDEXu00ae Fund is a consumer discretionary ETF utilizing an AlphaDEXu00ae methodology to potentially outperform traditional market-cap weighted indexes. Its active management approach differentiates it from passive counterparts like XLY and VCR. It targets growth by employing quantitative strategy of selecting stocks. While offering potential for higher returns, investors should consider its fees and risks associated with sector concentration and active management. It may be best suited for investors seeking alpha and willing to take on moderate risk to achieve higher returns in the consumer discretionary sector.

Data Sources:

• First Trust Website
• ETF.com
• Morningstar

Disclaimers:

This analysis is for informational purposes only and does not constitute investment advice. Investment decisions should be made based on individual circumstances and consultation with a qualified financial advisor. Market share data is approximate and may vary based on the source and date.