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A smart beta exchange traded fund, the First Trust Large Cap Value AlphaDEX ETF (FTA) debuted on 05/08/2007, and offers broad exposure to the Style Box - Large Cap Value category of the market.
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
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.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
The fund is sponsored by First Trust Advisors. It has amassed assets over $1.06 billion, making it one of the average sized ETFs in the Style Box - Large Cap Value. Before fees and expenses, FTA seeks to match the performance of the Nasdaq AlphaDEX Large Cap Value Index.
The NASDAQ AlphaDEX Large Cap Value Index is an enhanced index which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 500 Large Cap Value Index.
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 FTA are 0.58%, which makes it one of the more expensive products in the space.
The fund has a 12-month trailing dividend yield of 2.22%.
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
Representing 16.40% of the portfolio, the fund has heaviest allocation to the Financials sector; Energy and Utilities round out the top three.
Looking at individual holdings, Cvs Health Corporation (CVS) accounts for about 1.36% of total assets, followed by Chevron Corporation (CVX) and Devon Energy Corporation (DVN).
The top 10 holdings account for about 10.37% of total assets under management.
The ETF has lost about -3.16% and was up about 0.98% so far this year and in the past one year (as of 05/08/2025), respectively. FTA has traded between $67.12 and $83.49 during this last 52-week period.
FTA has a beta of 0.91 and standard deviation of 17.58% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 188 holdings, it effectively diversifies company-specific risk.
First Trust Large Cap Value AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.
Schwab U.S. Dividend Equity ETF (SCHD) tracks Dow Jones U.S. Dividend 100 Index and the Vanguard Value ETF (VTV) tracks CRSP U.S. Large Cap Value Index. Schwab U.S. Dividend Equity ETF has $66.65 billion in assets, Vanguard Value ETF has $130.52 billion. SCHD has an expense ratio of 0.06% and VTV 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 - Large Cap Value.
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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