Is First Trust Consumer Discretionary AlphaDEX ETF (FXD) a Strong ETF Right Now?

Launched on 05/08/2007, the First Trust Consumer Discretionary AlphaDEX ETF (FXD) is a smart beta exchange traded fund offering broad exposure to the Consumer Discretionary ETFs category of the market.

What Are Smart Beta ETFs?

For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.

Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.

There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.

Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.

While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.

Fund Sponsor & Index

The fund is managed by First Trust Advisors, and has been able to amass over $334.25 million, which makes it one of the larger ETFs in the Consumer Discretionary ETFs. FXD seeks to match the performance of the StrataQuant Consumer Discretionary Index before fees and expenses.

The StrataQuant Consumer Discretionary Index employs the AlphaDEX stock selection methodology to select stocks from the Russell 1000 Index.

Cost & Other Expenses

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Operating expenses on an annual basis are 0.61% for this ETF, which makes it on par with most peer products in the space.

It's 12-month trailing dividend yield comes in at 1.10%.

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 Consumer Discretionary sector - about 75.6% of the portfolio. Telecom and Industrials round out the top three.

When you look at individual holdings, Carvana Co. (class A) (CVNA) accounts for about 2.07% of the fund's total assets, followed by Five Below, Inc. (FIVE) and Spotify Technology S.a. (SPOT).

Its top 10 holdings account for approximately 15.9% of FXD's total assets under management.

Performance and Risk

So far this year, FXD return is roughly 1.78%, and is up roughly 9.79% in the last one year (as of 07/14/2025). During this past 52-week period, the fund has traded between $50.42 and $68.52.

The fund has a beta of 1.20 and standard deviation of 22.04% for the trailing three-year period, which makes FXD a medium risk choice in this particular space. With about 123 holdings, it effectively diversifies company-specific risk .

Alternatives

First Trust Consumer Discretionary AlphaDEX ETF is not a suitable option for investors seeking to outperform the Consumer Discretionary ETFs segment of the market. Instead, there are other ETFs in the space which investors should consider.

Vanguard Consumer Discretionary ETF (VCR) tracks MSCI US Investable Market Consumer Discretionary 25/50 Index and the Consumer Discretionary Select Sector SPDR ETF (XLY) tracks Consumer Discretionary Select Sector Index. Vanguard Consumer Discretionary ETF has $6.17 billion in assets, Consumer Discretionary Select Sector SPDR ETF has $22.66 billion. VCR has an expense ratio of 0.09% and XLY changes 0.08%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Consumer Discretionary ETFs

Bottom Line

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This article originally published on Zacks Investment Research (zacks.com).

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