Launched on 05/08/2007, the First Trust Consumer Staples AlphaDEX ETF (FXG – Free Report) is a smart beta exchange traded fund offering 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.
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.
There are some investors, though, who think it’s possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
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 managed by First Trust Advisors, and has been able to amass over $368.81 million, which makes it one of the average sized ETFs in the Consumer Staples ETFs. FXG seeks to match the performance of the StrataQuant Consumer Staples Index before fees and expenses.
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
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.
With one of the most expensive products in the space, this ETF has annual operating expenses of 0.62%.
It has a 12-month trailing dividend yield of 1.70%.
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 Consumer Staples sector – about 93.40% of the portfolio.
Looking at individual holdings, Performance Food Group Company (PFGC – Free Report) accounts for about 4.70% of total assets, followed by Pilgrim’s Pride Corporation (PPC – Free Report) and Ingredion Incorporated (INGR – Free Report) .
Its top 10 holdings account for approximately 40.96% of FXG’s total assets under management.
Performance and Risk
The ETF has added roughly 0.08% and is up about 1.66% so far this year and in the past one year (as of 01/03/2025), respectively. FXG has traded between $61.56 and $70.06 during this last 52-week period.
FXG has a beta of 0.68 and standard deviation of 13.30% 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 a reasonable option for investors seeking to outperform the Consumer Staples ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Consumer Staples ETF (VDC – Free Report) tracks MSCI US Investable Market Consumer Staples 25/50 Index and the Consumer Staples Select Sector SPDR ETF (XLP – Free Report) tracks Consumer Staples Select Sector Index. Vanguard Consumer Staples ETF has $6.90 billion in assets, Consumer Staples Select Sector SPDR ETF has $16.18 billion. VDC has an expense ratio of 0.10% and XLP charges 0.09%.
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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