First Trust Financials AlphaDEX® Fund (FXO)

Overview

The First Trust Financials AlphaDEXu00ae Fund (FXO) is designed to track the performance of an index of financial stocks selected based on growth factors including sales growth, price appreciation, and momentum, in addition to fundamental factors including return on assets, operating margin variation and asset turnover ratio.

Reputation and Reliability

First Trust is a well-established ETF provider with a reputation for innovation and a solid track record in managing various investment strategies.

Management Expertise

First Trust has experienced professionals managing the ETF with expertise in quantitative analysis and financial markets.

Goal

The fund seeks investment results that correspond generally to the price and yield, before fees and expenses, of an equity index called the StrataQuantu00ae Financials Index.

Investment Approach and Strategy

Strategy: The fund employs a quantitative methodology to select and weight stocks based on growth and value factors.

Composition The ETF holds primarily common stocks of U.S. financial companies.

Market Share: FXO holds a small share of the total Financial Sector ETF Market.

Total Net Assets (AUM): 408640000

Key Competitors

• Financial Select Sector SPDRu00ae Fund (XLF)
• iShares U.S. Financials ETF (IYF)
• Vanguard Financials ETF (VFH)

Competitive Landscape

The financial sector ETF market is highly competitive, with larger, more established ETFs like XLF and IYF dominating in terms of AUM and liquidity. FXO offers a differentiated approach through its AlphaDEX methodology, potentially appealing to investors seeking alpha, but it faces challenges in attracting assets due to its smaller size and potentially higher volatility compared to broad market-cap-weighted ETFs. Its advantages are its growth and value factor focus, but disadvantages include higher expense ratios and potentially less diversification.

Historical Performance: Past performance is not indicative of future results. Investors should review the fund's prospectus and fact sheet for detailed historical performance data.

Benchmark Comparison: Investors should compare FXO's performance to the StrataQuantu00ae Financials Index for a more comprehensive look at its effectiveness.

Expense Ratio: 0.61

Average Trading Volume

The average trading volume of FXO suggests it is a liquid investment, making it easier to buy and sell shares quickly.

Bid-Ask Spread

The bid-ask spread for FXO is typically competitive, indicating relatively low transaction costs.

Market Environment Factors

Economic indicators like interest rates, inflation, and GDP growth, along with regulatory changes and overall market sentiment, significantly impact the performance of FXO.

Growth Trajectory

FXO's growth trajectory is influenced by market volatility and financial sector trends, with strategy and holding adjustments made periodically based on the AlphaDEX methodology.

Competitive Edge

FXO's competitive advantage lies in its AlphaDEX methodology, which uses a quantitative approach to select stocks based on growth and value factors, potentially leading to superior risk-adjusted returns. This differs from traditional market-cap-weighted indices and offers investors a smart beta approach within the financial sector. The fund's methodology is actively managed and rebalanced regularly. Its focus on specific financial sector niches could be beneficial in specific market conditions.

Volatility

FXO's volatility may be higher compared to broader market ETFs due to its concentration in the financial sector and its AlphaDEX selection methodology.

Market Risk

FXO faces risks associated with the financial sector, including interest rate risk, credit risk, and regulatory risk.

Ideal Investor Profile

FXO is suitable for investors seeking exposure to the financial sector with a smart beta approach and a higher risk tolerance.

Market Risk

FXO is best for investors with a medium- to long-term investment horizon, seeking potential alpha generation within the financial sector and are willing to accept higher volatility.

The First Trust Financials AlphaDEXu00ae Fund (FXO) offers a smart beta approach to investing in the financial sector through its unique AlphaDEX methodology. It selects and weights stocks based on growth and value factors, potentially leading to superior risk-adjusted returns. While it provides a differentiated approach compared to market-cap-weighted ETFs, it carries sector-specific risks and may exhibit higher volatility. FXO suits investors seeking targeted exposure to the financial sector and willing to accept a higher risk profile for potential alpha generation.

Data Sources:

• First Trust Website
• ETF.com
• Morningstar

Disclaimers:

The information provided is for informational purposes only and should not be considered as financial advice. Investors should conduct their own research and consult with a financial advisor before making any investment decisions. Past performance is not indicative of future results.