Is First Trust Multi Cap Growth AlphaDEX ETF (FAD) a Strong ETF Right Now?

Launched on 05/08/2007, the First Trust Multi Cap Growth AlphaDEX ETF (FAD) is a smart beta exchange traded fund offering broad exposure to the Style Box - All Cap Growth 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.

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.

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.

Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.

Fund Sponsor & Index

The fund is sponsored by First Trust Advisors. It has amassed assets over $210.51 million, making it one of the average sized ETFs in the Style Box - All Cap Growth. Before fees and expenses, FAD seeks to match the performance of the Nasdaq AlphaDEX Multi Cap Growth Index.

The NASDAQ AlphaDEX Multi Cap Growth Index is an enhanced which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 500 Large Cap Index, NASDAQ US 600 Mid Cap Index and NASDAQ US 700 Small Cap Index.

Cost & Other Expenses

When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.

Annual operating expenses for FAD are 0.62%, which makes it on par with most peer products in the space.

FAD's 12-month trailing dividend yield is 0.61%.

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 Financials sector - about 20.40% of the portfolio. Industrials and Information Technology round out the top three.

Looking at individual holdings, Howmet Aerospace Inc. (HWM) accounts for about 0.57% of total assets, followed by Palantir Technologies Inc. (class A) (PLTR) and Robinhood Markets, Inc. (class A) (HOOD).

The top 10 holdings account for about 5.26% of total assets under management.

Performance and Risk

So far this year, FAD has lost about -10.60%, and it's up approximately 7.51% in the last one year (as of 04/21/2025). During this past 52-week period, the fund has traded between $114.67 and $150.30.

The fund has a beta of 1.14 and standard deviation of 20.94% for the trailing three-year period, which makes FAD a medium risk choice in this particular space. With about 675 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust Multi Cap Growth AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Growth segment of the market. However, there are other ETFs in the space which investors could consider.

Fidelity Blue Chip Growth ETF (FBCG) tracks ---------------------------------------- and the iShares Core S&P U.S. Growth ETF (IUSG) tracks S&P 900 Growth Index. Fidelity Blue Chip Growth ETF has $3.35 billion in assets, iShares Core S&P U.S. Growth ETF has $18.89 billion. FBCG has an expense ratio of 0.59% and IUSG charges 0.04%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - All Cap Growth.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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

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