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.
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.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
There are some investors, though, who think it’s possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
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 $503.74 million, making it one of the average sized ETFs in the Broad Developed World ETFs. FGD, before fees and expenses, seeks to match the performance of the Dow Jones Global Select Dividend Index.
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
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 cousins, other things remaining the same.
With one of the more expensive products in the space, this ETF has annual operating expenses of 0.57%.
The fund has a 12-month trailing dividend yield of 3.66%.
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.
Taking into account individual holdings, Labrador Royalty Corp. (LIF.CN) accounts for about 1.80% of the fund’s total assets, followed by Fortescue Metals Group (OTC:) Limited (FMG.AU) and Enagas S.a. (ENG.SM).
FGD’s top 10 holdings account for about 15.78% of its total assets under management.
Performance and Risk
So far this year, FGD has added roughly 23.95%, and was up about 61.38% in the last one year (as of 05/27/2021). During this past 52-week period, the fund has traded between $17.49 and $27.16.
The ETF has a beta of 1.05 and standard deviation of 25.05% for the trailing three-year period, making it a low risk choice in the space. With about 100 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 Global All Cap Index. IShares MSCI ACWI ETF has $17.06 billion in assets, Vanguard Total World Stock ETF has $20.80 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.
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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