Should First Trust Mid Cap Growth AlphaDEX Fund (FNY) Be on Your Investing Radar?

Looking for broad exposure to the Mid Cap Growth segment of the US equity market? You should consider the First Trust Mid Cap Growth AlphaDEX Fund (FNY), a passively managed exchange traded fund launched on 04/19/2011.

The fund is sponsored by First Trust Advisors. It has amassed assets over $230.10 M, making it the smallest ETFs attempting to match the Mid Cap Growth segment of the US equity market.

Why Mid Cap Growth

With market capitalization between $2 billion and $10 billion, mid cap companies usually contain higher growth prospects than large cap companies, and are considered less risky than their small cap counterparts. Thus they have a nice balance of growth potential and stability.

Qualities of growth stocks include faster growth rates compared to the broader market, as well as higher valuations and higher than average sales and earnings growth rates. Additionally, growth stocks have a greater level of risk associated with them. They are likely to outperform value stocks in strong bull markets but over the longer-term, value stocks have delivered better returns than growth stocks in almost all markets.

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 0.70%, making it the most expensive products in the space.

It has a 12-month trailing dividend yield of 0.05%.

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 Information Technology sector--about 24% of the portfolio. Healthcare and Consumer Discretionary round out the top three.

Looking at individual holdings, Zendesk, Inc. (ZEN) accounts for about 0.86% of total assets, followed by Insperity, Inc. (NSP) and Okta, Inc. (OKTA).

The top 10 holdings account for about 8.34% of total assets under management.

Performance and Risk

FNY seeks to match the performance of the Nasdaq AlphaDEX Mid Cap Growth Index before fees and expenses. The NASDAQ AlphaDEX Mid Cap Growth Index is an enhanced which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 600 Mid Cap Growth Index.

The ETF has added about 18.75% so far this year and is up about 4.75% in the last one year (as of 03/06/2019). In the past 52-week period, it has traded between $33.42 and $47.12.

The ETF has a beta of 1.16 and standard deviation of 16.03% for the trailing three-year period, making it a medium risk choice in the space. With about 225 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust Mid Cap Growth AlphaDEX Fund holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, FNY is a great option for investors seeking exposure to the Style Box - Mid Cap Growth segment of the market. There are other additional ETFs in the space that investors could consider as well.

The iShares S&P Mid-Cap 400 Growth ETF (IJK) and the iShares Russell Mid-Cap Growth ETF (IWP) track a similar index. While iShares S&P Mid-Cap 400 Growth ETF has $7.60 B in assets, iShares Russell Mid-Cap Growth ETF has $10.05 B. IJK has an expense ratio of 0.25% and IWP charges 0.25%.

Bottom-Line

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.

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 Mid Cap Growth AlphaDEX Fund (FNY): ETF Research Reports
 
Zendesk, Inc. (ZEN) : Free Stock Analysis Report
 
iShares Russell Mid-Cap Growth ETF (IWP): ETF Research Reports
 
Insperity, Inc. (NSP) : Free Stock Analysis Report
 
Okta, Inc. (OKTA) : Free Stock Analysis Report
 
iShares S&P Mid-Cap 400 Growth ETF (IJK): ETF Research Reports
 
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