Is First Trust Health Care AlphaDEX ETF (FXH) a Strong ETF Right Now?

Designed to provide broad exposure to the Health Care ETFs category of the market, the First Trust Health Care AlphaDEX ETF (FXH) is a smart beta exchange traded fund launched on 05/08/2007.

What Are Smart Beta ETFs?

The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.

Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.

If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.

These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.

Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.

Fund Sponsor & Index

The fund is sponsored by First Trust Advisors. It has amassed assets over $904 million, making it one of the larger ETFs in the Health Care ETFs. This particular fund seeks to match the performance of the StrataQuant Health Care Index before fees and expenses.

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

Cost & Other Expenses

For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.

Operating expenses on an annual basis are 0.60% 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 0.73%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

For FXH, it has heaviest allocation in the Healthcare sector --about 100% of the portfolio.

When you look at individual holdings, Insmed Incorporated (INSM) accounts for about 3.06% of the fund's total assets, followed by United Therapeutics Corporation (UTHR) and Elanco Animal Health Incorporated (ELAN).

The top 10 holdings account for about 25.67% of total assets under management.

Performance and Risk

So far this year, FXH return is roughly 5.92%, and is up roughly 1.55% in the last one year (as of 10/13/2025). During this past 52-week period, the fund has traded between $93.63 and $114.05.

The fund has a beta of 0.78 and standard deviation of 15.37% for the trailing three-year period, which makes FXH a medium risk choice in this particular space. With about 77 holdings, it effectively diversifies company-specific risk .

Alternatives

First Trust Health Care AlphaDEX ETF is a reasonable option for investors seeking to outperform the Health Care ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

Vanguard Health Care ETF (VHT) tracks MSCI US Investable Market Health Care 25/50 Index and the Health Care Select Sector SPDR ETF (XLV) tracks Health Care Select Sector Index. Vanguard Health Care ETF has $15.62 billion in assets, Health Care Select Sector SPDR ETF has $35.55 billion. VHT has an expense ratio of 0.09% and XLV 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 Health Care ETFs

Bottom Line

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

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