Is First Trust Dow Jones Global Select Dividend ETF (FGD) a Strong ETF Right Now?

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The First Trust Dow Jones Global Select Dividend ETF (FGD) was launched on 11/21/2007, and is a smart beta exchange traded fund designed to offer broad exposure to the Broad Developed World ETFs category of the market.

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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.

But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.

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.

Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.

Fund Sponsor & Index

Managed by First Trust Advisors, FGD has amassed assets over $509.44 million, making it one of the average sized ETFs in the Broad Developed World ETFs. This particular fund 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

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF’s expense ratio.

Annual operating expenses for FGD are 0.57%, which makes it on par with most peer products in the space.

The fund has a 12-month trailing dividend yield of 4.77%.

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.

Looking at individual holdings, Labrador Iron Ore Royalty Corp. (LIF.CN) accounts for about 2% of total assets, followed by Meritz Securities Co., Ltd. (008560.KS) and Telefonica, S.a. (TEF.SM).

The top 10 holdings account for about 16.3% of total assets under management.

Performance and Risk

The ETF has added about 19.19% so far this year and it’s up approximately 40.40% in the last one year (as of 10/12/2021). In the past 52-week period, it has traded between $17.73 and $27.47.

FGD has a beta of 1.03 and standard deviation of 25.15% for the trailing three-year period, which makes the fund a low risk choice in the space. With about 98 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust Dow Jones Global Select Dividend ETF is a reasonable option for investors seeking to outperform the Broad Developed World ETFs segment of the market. However, there are other ETFs in the space which investors could 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 $16.30 billion in assets, Vanguard Total World Stock ETF has $23.53 billion. ACWI has an expense ratio of 0.32% and VT charges 0.08%.

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.

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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