First Trust Technology AlphaDEX ETF (FXL – Free Report) launched on 05/08/2007, is a passively managed exchange-traded fund designed to provide exposure to broad technology exposure – a broad segment of the stock market.
Retail and institutional investors are increasingly turning to passively managed ETFs because of their low cost, transparency, flexibility, and tax efficiency; these funds are also excellent vehicles for long-term investors.
Sector ETFs also offer investors the opportunity to invest in a broad range of companies in a specific industry, which provide low-risk and diversified exposure. Technology – Broad is one of the 16 broad Zacks sectors in the Zacks Industry classification. It currently ranks 6th and is in the top 38%.
The fund is sponsored by First Trust Advisors. It has amassed more than $1.02 billion in assets, making it one of the larger ETFs trying to match the performance of a broad segment of the tech-stock market. FXL seeks to match the performance of the StrataQuant Technology Index before fees and expenses.
The StrataQuant Technology Index is a modified equal dollar weighted index designed by AMEX to objectively identify and select stocks from the Russell 1000 Index that are likely to generate positive alpha relative to traditional passive indices by using the AlphaDEX screening methodology.
Since cheaper funds tend to produce better results than more expensive funds, it’s important for investors to pay attention to an ETF’s expense ratio, assuming all other factors remain constant.
The ETF has an annual operating expense of 0.61%, which is on par with most of its peers in the space.
Its 12-month trailing dividend yield is 0.32%.
Industry Risks and Top Holdings
ETFs offer diversified exposure, thereby minimizing single-stock risk, but it’s still important to gain a solid understanding of a fund’s holdings before investing. Most ETFs are very transparent products, and many disclose their holdings on a daily basis.
This ETF has the heaviest allocation to the information technology sector – approximately 87.70% of the portfolio. Industry and telecommunications round out the top three.
Looking at individual holdings, Hewlett-Packard Enterprise (HPE – Free Report) accounted for about 2.18% of the total assets, followed by Jabil. (JBL – free report) and Concentrix Corp. (CNXC – free report).
The top 10 holdings accounted for about 19.04% of the total assets under management.
performance and risk
The ETF is up about 7.01% year-to-date and down about -20.60% over the year ending January 17, 2023. Over the past 52-week period, FXL has traded between $84.85 and $121.88.
The ETF has a beta of 1.17 and a standard deviation of 32.38% over the past three years, making it a medium-risk pick in the space. It holds about 100 stocks, effectively diversifying company-specific risk.
First Trust Technology AlphaDEX ETF holds a Zacks ETF Rank 2 (Buy), which is based on factors such as expected asset class returns, expense ratio, and momentum. Because of this, FXL is an excellent choice for investors looking for exposure to the technology ETF market. Investors may also consider other ETFs in the space.
Technology Select Sector SPDR ETF (Xinlikang – Free Report) Tracks the Technology Select Sector Index and the Vanguard Information Technology ETF (VGT – Free report) tracks the MSCI US Investable Market Information Technology 25/50 Index. The Technology Select Sector SPDR ETF has assets of $39.42 billion and the Vanguard Information Technology ETF has assets of $41.42 billion. The expense ratio is 0.10% for XLK and 0.10% for VGT.
the bottom line
To learn more about this and other ETFs, screen for products that fit your investing goals, and read articles about the latest developments in the ETF investing world, visit the Zacks ETF Center.