Is First Trust Consumer Staples AlphaDEX ETF (FXG) a Strong ETF Right Now?

The First Trust Consumer Staples AlphaDEX ETF (FXG) was launched on 05/08/2007, and is a smart beta exchange traded fund designed to offer broad exposure to the Consumer Staples ETFs category of the market.

What Are Smart Beta ETFs?

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 work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.

But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.

Fund Sponsor & Index

The fund is sponsored by First Trust Advisors. It has amassed assets over $284.06 million, making it one of the average sized ETFs in the Consumer Staples ETFs. This particular fund, before fees and expenses, seeks to match the performance of the StrataQuant Consumer Staples Index.

The StrataQuant Consumer Staples 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.

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 FXG are 0.62%, which makes it one of the most expensive products in the space.

The fund has a 12-month trailing dividend yield of 1.95%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

For FXG, it has heaviest allocation in the Consumer Staples sector --about 85.30% of the portfolio --while Healthcare and Materials round out the top three.

When you look at individual holdings, Cvs Health Corporation (CVS) accounts for about 6.16% of the fund's total assets, followed by Pilgrim's Pride Corporation (PPC) and Molson Coors Beverage Company (TAP).

The top 10 holdings account for about 42.42% of total assets under management.

Performance and Risk

So far this year, FXG has added roughly 0.81%, and is down about -1.52% in the last one year (as of 05/09/2025). During this past 52-week period, the fund has traded between $61.21 and $70.06.

FXG has a beta of 0.61 and standard deviation of 13.56% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 41 holdings, it has more concentrated exposure than peers.

Alternatives

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

Vanguard Consumer Staples ETF (VDC) tracks MSCI US Investable Market Consumer Staples 25/50 Index and the Consumer Staples Select Sector SPDR ETF (XLP) tracks Consumer Staples Select Sector Index. Vanguard Consumer Staples ETF has $7.52 billion in assets, Consumer Staples Select Sector SPDR ETF has $15.81 billion. VDC has an expense ratio of 0.09% and XLP charges 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 Staples ETFs.

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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