Is First Trust Dow Jones Global Select Dividend Index Fund (FGD) a Strong ETF Right Now?
Launched on 11/21/2007, the First Trust Dow Jones Global Select Dividend Index Fund (FGD) is a smart beta exchange traded fund offering broad exposure to the Broad Developed World ETFs 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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
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.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
Managed by First Trust Advisors, FGD has amassed assets over $499.98 M, making it one of the average sized ETFs in the Broad Developed World ETFs. FGD seeks to match the performance of the Dow Jones Global Select Dividend Index before fees and expenses.
This Index is an indicated annual dividend yield weighted index of 100 stocks selected from the developed-market portion of the Dow Jones World Index.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Operating expenses on an annual basis are 0.58% for this ETF, which makes it one of the more expensive products in the space.
It's 12-month trailing dividend yield comes in at 5.64%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
Taking into account individual holdings, Standard Life Aberdeen Plc (SLA.LN) accounts for about 1.67% of the fund's total assets, followed by Gamestop Corp. (class A) (GME) and Azimut Holding Spa (AZM.IM).
FGD's top 10 holdings account for about 13.97% of its total assets under management.
Performance and Risk
Year-to-date, the First Trust Dow Jones Global Select Dividend Index Fund return is roughly 4.92% so far, and is down about -6.81% over the last 12 months (as of 05/29/2019). FGD has traded between $21.06 and $26.09 in this past 52-week period.
The fund has a beta of 0.80 and standard deviation of 12.87% for the trailing three-year period, which makes FGD a low risk choice in this particular space. With about 101 holdings, it effectively diversifies company-specific risk.
First Trust Dow Jones Global Select Dividend Index Fund is not a suitable option for investors seeking to outperform the Broad Developed World ETFs segment of the market. Instead, there are other ETFs in the space which investors should consider.
IShares MSCI ACWI ETF (ACWI) tracks MSCI All Country World Index and the Vanguard Total World Stock ETF (VT) tracks FTSE Global All Cap Index. IShares MSCI ACWI ETF has $10.26 B in assets, Vanguard Total World Stock ETF has $12.11 B. ACWI has an expense ratio of 0.31% and VT 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 Broad Developed World ETFs.
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 Dow Jones Global Select Dividend Index Fund (FGD): ETF Research Reports
iShares MSCI ACWI ETF (ACWI): ETF Research Reports
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Vanguard Total World Stock ETF (VT): ETF Research Reports
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