Should You Invest in the First Trust Health Care AlphaDEX ETF (FXH)?

Designed to provide broad exposure to the Healthcare - Broad segment of the equity market, the First Trust Health Care AlphaDEX ETF (FXH) is 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.

Investor-friendly, sector ETFs provide many options to gain low risk and diversified exposure to a broad group of companies in particular sectors. Healthcare - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 4, placing it in top 25%.

Index Details

The fund is sponsored by First Trust Advisors. It has amassed assets over $911.58 million, making it one of the larger ETFs attempting to match the performance of the Healthcare - Broad segment of the equity market. FXH 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.

Costs

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for this ETF are 0.60%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 0.38%.

Sector Exposure and Top Holdings

ETFs offer a 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.

This ETF has heaviest allocation in the Healthcare sector--about 100% of the portfolio.

Looking at individual holdings, Tenet Healthcare Corporation (THC) accounts for about 2.51% of total assets, followed by Cardinal Health, Inc. (CAH) and Penumbra, Inc. (PEN).

The top 10 holdings account for about 23.40% of total assets under management.

Performance and Risk

The ETF has lost about -1.87% so far this year and is down about -2.36% in the last one year (as of 06/05/2025). In that past 52-week period, it has traded between $93.63 and $113.83.

The ETF has a beta of 0.75 and standard deviation of 16.28% for the trailing three-year period, making it a medium risk choice in the space. With about 77 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust Health Care AlphaDEX ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, FXH is a sufficient option for those seeking exposure to the Health Care ETFs area of the market. Investors might also want to consider some other ETF options in the space.

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 $15.13 billion in assets, Health Care Select Sector SPDR ETF has $34.68 billion. VHT has an expense ratio of 0.09% and XLV 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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