Should You Invest in the First Trust NASDAQ Clean Edge Smart Grid Infrastructure ETF (GRID)?

Launched on 11/16/2009, the First Trust NASDAQ Clean Edge Smart Grid Infrastructure ETF (GRID) is a passively managed exchange traded fund designed to provide a broad exposure to the Utilities - Infrastructure segment of the equity market.

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.

Investor-friendly, sector ETFs provide many options to gain low risk and diversified exposure to a broad group of companies in particular sectors. Utilities - Infrastructure is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 4, placing it in top 25%.

Index Details

The fund is sponsored by First Trust Advisors. It has amassed assets over $1.04 billion, making it one of the larger ETFs attempting to match the performance of the Utilities - Infrastructure segment of the equity market. GRID seeks to match the performance of the NASDAQ OMX Clean Edge Smart Grid Infrastructure Index before fees and expenses.

The NASDAQ OMX Clean Edge Smart Grid Infrastructure Index includes companies that are primarily engaged and involved in electric grid, electric meters and devices, networks, energy storage and management, and enabling software used by the smart grid infrastructure sector.

Costs

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 0.57%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 1.14%.

Sector Exposure and Top Holdings

ETFs offer a 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.

Looking at individual holdings, Abb Ltd (ABBN.SW) accounts for about 8.09% of total assets, followed by Eaton Corporation Plc (ETN) and Schneider Electric Se (SU.FP).

The top 10 holdings account for about 56.64% of total assets under management.

Performance and Risk

Year-to-date, the First Trust NASDAQ Clean Edge Smart Grid Infrastructure ETF has added roughly 9.87% so far, and is up about 20.90% over the last 12 months (as of 05/06/2024). GRID has traded between $85.32 and $114.94 in this past 52-week period.

The ETF has a beta of 1.26 and standard deviation of 20.82% for the trailing three-year period, making it a high risk choice in the space. With about 110 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust NASDAQ Clean Edge Smart Grid Infrastructure 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, GRID is a reasonable option for those seeking exposure to the Utilities/Infrastructure ETFs area of the market. Investors might also want to consider some other ETF options in the space.

IShares Global Infrastructure ETF (IGF) tracks S&P Global Infrastructure Index and the Global X U.S. Infrastructure Development ETF (PAVE) tracks INDXX U.S. Infrastructure Development Index. IShares Global Infrastructure ETF has $3.63 billion in assets, Global X U.S. Infrastructure Development ETF has $7.33 billion. IGF has an expense ratio of 0.41% and PAVE charges 0.47%.

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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First Trust NASDAQ Clean Edge Smart Grid Infrastructure ETF (GRID): ETF Research Reports

Eaton Corporation, PLC (ETN) : Free Stock Analysis Report

iShares Global Infrastructure ETF (IGF): ETF Research Reports

Global X U.S. Infrastructure Development ETF (PAVE): 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.

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