First Trust Technology AlphaDEX® Fund (FXL)

Overview

The First Trust Technology AlphaDEXu00ae Fund (FXL) seeks investment results that correspond generally to the price and yield, before fees and expenses, of an equity index called the StrataQuantu00ae Technology Index. The fund uses a quantitative model to select and weight technology stocks based on growth factors including sales to price ratio, one year sales growth and momentum, and value factors including book value to price ratio, cash flow to price ratio, and return on assets.

Reputation and Reliability

First Trust is a well-established ETF provider with a solid reputation and a history of innovative investment products.

Management Expertise

First Trust has a dedicated team of portfolio managers and analysts experienced in quantitative investing and the technology sector.

Goal

To seek investment results that correspond generally to the price and yield, before fees and expenses, of the StrataQuantu00ae Technology Index.

Investment Approach and Strategy

Strategy: The fund does not track a market cap weighted index. It employs a quantitative and rules-based strategy to select and weight stocks.

Composition The ETF primarily holds stocks within the technology sector.

Market Share: The fund holds a moderate market share within its segment of the technology ETF market.

Total Net Assets (AUM): 1519000000

Key Competitors

• Invesco QQQ Trust (QQQ)
• Technology Select Sector SPDRu00ae Fund (XLK)
• Vanguard Information Technology ETF (VGT)

Competitive Landscape

The technology ETF market is highly competitive, dominated by large, passively managed ETFs tracking market-cap weighted indices. FXL differentiates itself through its active management and quantitative stock selection approach, which might appeal to investors seeking to outperform traditional benchmarks but may underperform during sustained market rallies. Competing passively managed ETFs like QQQ or XLK have lower expense ratios.

Historical Performance: Historical performance varies depending on market conditions and should be checked against benchmarks. Data should include returns over the past 1, 3, 5, and 10 years, if available.

Benchmark Comparison: The fund's performance is compared to the StrataQuantu00ae Technology Index.

Expense Ratio: 0.007

Average Trading Volume

The average daily trading volume is moderate, providing adequate liquidity for most investors.

Bid-Ask Spread

The bid-ask spread is typically tight, reflecting reasonable trading costs.

Market Environment Factors

Technology sector performance, interest rates, economic growth, and regulatory changes impact FXL.

Growth Trajectory

The growth trajectory depends on the success of the fund's quantitative model and the overall health of the technology sector. Strategies and holdings are adjusted based on prevailing market conditions.

Competitive Edge

FXL's competitive edge lies in its AlphaDEXu00ae methodology, which selects and weights stocks based on growth and value factors, aiming to generate alpha. This differentiates it from passive, market-cap-weighted ETFs. The methodology may provide downside protection during bear markets and potentially higher returns during bull markets, though it may underperform if the underlying AlphaDEX model does not achieve its objectives. It targets a specific segment of the technology sector using a systematic, factor-based approach.

Volatility

Volatility is expected to be high, due to concentration in the technology sector.

Market Risk

Market risk exists due to the exposure to the technology sector, which can be highly sensitive to market fluctuations and economic cycles.

Ideal Investor Profile

Investors seeking exposure to the technology sector with a preference for a quantitative, factor-based approach may find FXL appealing. Investors who understand active fund management and are comfortable with potential for outperformance or underperformance relative to passive benchmarks should invest in it.

Market Risk

FXL may be suitable for long-term investors with a high-risk tolerance, and is more suited for investors who want to participate in a specific segment of the technology market. Not suitable for passive index followers.

First Trust Technology AlphaDEXu00ae Fund (FXL) provides exposure to technology stocks through a unique quantitative investment strategy. It selects and weights stocks based on growth and value factors, which differentiates it from passively managed ETFs. While this approach offers the potential for outperformance, it also comes with higher volatility. The fund suits investors seeking to enhance returns in the technology sector but should carefully consider the risks associated with active management.

Data Sources:

• First Trust, ETF.com, Yahoo Finance

Disclaimers:

Investment involves risks. Past performance is not indicative of future results. Consult with a financial advisor before making any investment decisions.