A smart beta exchange traded fund, the First Trust Small Cap Core AlphaDEX ETF (FYX) debuted on 05/08/2007, and offers broad exposure to the Style Box - Small Cap Blend 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.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
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.
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.
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
Because the fund has amassed over $821.34 million, this makes it one of the average sized ETFs in the Style Box - Small Cap Blend. FYX is managed by First Trust Advisors. This particular fund seeks to match the performance of the Nasdaq AlphaDEX Small Cap Core Index before fees and expenses.
The NASDAQ AlphaDEX Small Cap Core Index is an enhanced index which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 700 Small Cap Index.
Cost & Other Expenses
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 FYX are 0.61%, which makes it one of the more expensive products in the space.
It has a 12-month trailing dividend yield of 1.25%.
Sector Exposure and Top Holdings
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.
This ETF has heaviest allocation in the Financials sector - about 24.7% of the portfolio. Industrials and Consumer Discretionary round out the top three.
Taking into account individual holdings, Sezzle Inc. (SEZL) accounts for about 0.9% of the fund's total assets, followed by Dave Inc. (class A) (DAVE) and Centrus Energy Corp. (class A) (LEU).
FYX's top 10 holdings account for about 5.67% of its total assets under management.
Performance and Risk
The ETF has lost about -3.66% so far this year and was up about 8.89% in the last one year (as of 07/01/2025). In the past 52-week period, it has traded between $79.22 and $110.53
The fund has a beta of 1.12 and standard deviation of 22.28% for the trailing three-year period, which makes FYX a medium risk choice in this particular space. With about 526 holdings, it effectively diversifies company-specific risk .
Alternatives
First Trust Small Cap Core AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - Small Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
iShares Russell 2000 ETF (IWM) tracks Russell 2000 Index and the iShares Core S&P Small-Cap ETF (IJR) tracks S&P SmallCap 600 Index. iShares Russell 2000 ETF has $64.08 billion in assets, iShares Core S&P Small-Cap ETF has $78.97 billion. IWM has an expense ratio of 0.19% and IJR changes 0.06%.
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 - Small Cap Blend
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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First Trust Small Cap Core AlphaDEX ETF (FYX): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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