A smart beta exchange traded fund, the First Trust Dow Jones Global Select Dividend ETF (FGD) debuted on 11/21/2007, and offers broad exposure to the Broad Developed World ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies–popularly known as smart beta.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
The fund is sponsored by First Trust Advisors. It has amassed assets over $536.43 million, making it one of the average sized ETFs in the Broad Developed World ETFs. This particular fund, before fees and expenses, seeks to match the performance of the Dow Jones Global Select Dividend Index.
The Dow Jones Global Select Dividend 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
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Operating expenses on an annual basis are 0.57% for this ETF, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 5.74%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Taking into account individual holdings, Fortescue Metals Group Limited (FMG.AU) accounts for about 2.75% of the fund’s total assets, followed by A.p. Moeller – Maersk A/s (class A) (MAERSKA.DC) and Mitsui O.s.k. Lines, Ltd. (9104.JP).
Its top 10 holdings account for approximately 16.86% of FGD’s total assets under management.
Performance and Risk
Year-to-date, the First Trust Dow Jones Global Select Dividend ETF has lost about -8.18% so far, and is down about -7.41% over the last 12 months (as of 01/02/2023). FGD has traded between $18.30 and $26.73 in this past 52-week period.
The fund has a beta of 0.95 and standard deviation of 26.58% for the trailing three-year period, which makes FGD a low risk choice in this particular space. With about 101 holdings, it effectively diversifies company-specific risk.
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 $17.84 billion in assets, Vanguard Total World Stock ETF has $23.64 billion. ACWI has an expense ratio of 0.32% and VT charges 0.07%.
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.
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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