If you're interested in broad exposure to the Large Cap Blend segment of the US equity market, look no further than the First Trust Capital Strength ETF (FTCS), a passively managed exchange traded fund launched on 07/06/2006.
The fund is sponsored by First Trust Advisors. It has amassed assets over $1.29 B, making it one of the larger ETFs attempting to match the Large Cap Blend segment of the US equity market.
Why Large Cap Blend
Large cap companies usually have a market capitalization above $10 billion. Considered a more stable option, large cap companies boast more predictable cash flows and are less volatile than their mid and small cap counterparts.
Blend ETFs are aptly named, since they tend to hold a mix of growth and value stocks, as well as show characteristics of both kinds of equities.
Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.
Annual operating expenses for this ETF are 0.61%, making it one of the more expensive products in the space.
It has a 12-month trailing dividend yield of 1.64%.
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.
This ETF has heaviest allocation to the Industrials sector--about 23.30% of the portfolio. Financials and Information Technology round out the top three.
Looking at individual holdings, Starbucks Corporation (SBUX) accounts for about 2.39% of total assets, followed by American Tower Corporation (AMT) and The Procter & Gamble Company (PG).
The top 10 holdings account for about 22.4% of total assets under management.
Performance and Risk
FTCS seeks to match the performance of the The Capital Strength Index before fees and expenses. The Capital Strength Index is an equal-dollar weighted index which provides exposure to well-capitalized companies with strong market positions based on strong balance sheets, high degree of liquidity, ability to generate earnings growth & record financial strength & profit growth.
The ETF has lost about -6.57% so far this year and is down about -6.82% in the last one year (as of 12/21/2018). In the past 52-week period, it has traded between $47.05 and $55.82.
The ETF has a beta of 0.91 and standard deviation of 12.02% for the trailing three-year period, making it a medium risk choice in the space. With about 50 holdings, it has more concentrated exposure than peers.
First Trust Capital Strength 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, FTCS is a sufficient option for those seeking exposure to the Style Box - Large Cap Blend area of the market. Investors might also want to consider some other ETF options in the space.
The iShares Core S&P 500 ETF (IVV) and the SPDR S&P 500 ETF (SPY) track a similar index. While iShares Core S&P 500 ETF has $144.96 B in assets, SPDR S&P 500 ETF has $237.85 B. IVV has an expense ratio of 0.04% and SPY charges 0.09%.
While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.
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 .
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.