Should You Invest in the First Trust Energy AlphaDEX ETF (FXN)?

Looking for broad exposure to the Energy - Broad segment of the equity market? You should consider the First Trust Energy AlphaDEX ETF (FXN), a passively managed exchange traded fund launched on 05/08/2007.

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.

Additionally, sector ETFs offer convenient ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Energy - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 14, placing it in bottom 13%.

Index Details

The fund is sponsored by First Trust Advisors. It has amassed assets over $272.48 million, making it one of the average sized ETFs attempting to match the performance of the Energy - Broad segment of the equity market. FXN seeks to match the performance of the StrataQuant Energy Index before fees and expenses.

The StrataQuant Energy Index is a modified equal-dollar weighted index designed by the AMEX to objectively identify and select stocks from the Russell 1000 Index that may generate positive alpha relative to traditional passive style indices through the use of the AlphaDEX screening methodology.

Costs

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.

Annual operating expenses for this ETF are 0.61%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 3.09%.

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.

This ETF has heaviest allocation in the Energy sector--about 97.30% of the portfolio.

Looking at individual holdings, Devon Energy Corporation (DVN) accounts for about 4.66% of total assets, followed by Ovintiv Inc. (OVV) and Nov Inc. (NOV).

The top 10 holdings account for about 39.81% of total assets under management.

Performance and Risk

So far this year, FXN has lost about -12.98%, and is down about -20.60% in the last one year (as of 05/06/2025). During this past 52-week period, the fund has traded between $12.88 and $18.89.

The ETF has a beta of 0.89 and standard deviation of 29.90% for the trailing three-year period, making it a high risk choice in the space. With about 41 holdings, it has more concentrated exposure than peers.

Alternatives

First Trust Energy AlphaDEX ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, FXN is a great option for investors seeking exposure to the Energy ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

Vanguard Energy ETF (VDE) tracks MSCI US Investable Market Energy 25/50 Index and the Energy Select Sector SPDR ETF (XLE) tracks Energy Select Sector Index. Vanguard Energy ETF has $6.82 billion in assets, Energy Select Sector SPDR ETF has $26.36 billion. VDE has an expense ratio of 0.09% and XLE charges 0.08%.

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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