Should You Invest in the First Trust Dow Jones Internet ETF (FDN)?
Looking for broad exposure to the Technology - Internet segment of the equity market? You should consider the First Trust Dow Jones Internet ETF (FDN), a passively managed exchange traded fund launched on 06/19/2006.
Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.
Additionally, sector ETFs offer convenient ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Technology - Internet is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 10, placing it in bottom 38%.
The fund is sponsored by First Trust Advisors. It has amassed assets over $6.38 billion, making it one of the largest ETFs attempting to match the performance of the Technology - Internet segment of the equity market. FDN seeks to match the performance of the Dow Jones Internet Composite Index before fees and expenses.
The Dow Jones Internet Composite Index includes only companies whose primary focus is Internet-related.
When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.
Annual operating expenses for this ETF are 0.51%, making it on par with most peer products in the space.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Information Technology sector--about 44.50% of the portfolio. Telecom and Consumer Discretionary round out the top three.
Looking at individual holdings, Amazon.com, Inc. (AMZN) accounts for about 10.27% of total assets, followed by Alphabet Inc. (class A) (GOOGL) and Meta Platforms Inc. (class A) (FB).
The top 10 holdings account for about 49.91% of total assets under management.
Performance and Risk
The ETF has lost about -26.35% so far this year and is down about -25.14% in the last one year (as of 03/14/2022). In that past 52-week period, it has traded between $166.80 and $252.25.
The ETF has a beta of 1.07 and standard deviation of 27.88% for the trailing three-year period, making it a high risk choice in the space. With about 43 holdings, it has more concentrated exposure than peers.
First Trust Dow Jones Internet 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, FDN is a sufficient option for those seeking exposure to the Technology ETFs area of the market. Investors might also want to consider some other ETF options in the space.
Amplify Transformational Data Sharing ETF (BLOK) tracks ---------------------------------------- and the ARK Next Generation Internet ETF (ARKW) tracks N/A. Amplify Transformational Data Sharing ETF has $902.98 million in assets, ARK Next Generation Internet ETF has $1.97 billion. BLOK has an expense ratio of 0.71% and ARKW charges 0.83%.
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 Internet ETF (FDN): ETF Research Reports
Amazon.com, Inc. (AMZN): Free Stock Analysis Report
Meta Platforms, Inc. (FB): Free Stock Analysis Report
Alphabet Inc. (GOOGL): Free Stock Analysis Report
ARK Next Generation Internet ETF (ARKW): ETF Research Reports
Amplify Transformational Data Sharing ETF (BLOK): ETF Research Reports
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Zacks Investment Research
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.