Making its debut on 11/21/2007, smart beta exchange traded fund First Trust Dow Jones Global Select Dividend ETF (FGD) provides investors broad exposure to the Broad Developed World ETFs category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
If you’re the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix 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 managed by First Trust Advisors. FGD has been able to amass assets over $618.68 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.
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
Investors should also pay attention to an ETF’s expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Operating expenses on an annual basis are 0.56% for FGD, making it on par with most peer products in the space.
It’s 12-month trailing dividend yield comes in at 6.62%.
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.
Looking at individual holdings, Mitsui O.s.k. Lines, Ltd. (9104.JP) accounts for about 2.49% of total assets, followed by Nippon Yusen K.k. (9101.JP) and Industrial Bank Of Korea (ibk) (024110.KS).
FGD’s top 10 holdings account for about 17.14% of its total assets under management.
Performance and Risk
The ETF has lost about -2.65% and is down about -1.27% so far this year and in the past one year (as of 01/22/2024), respectively. FGD has traded between $19.81 and $23.92 during this last 52-week period.
The ETF has a beta of 0.95 and standard deviation of 15.92% for the trailing three-year period, making it a low risk choice in the space. With about 99 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 $18.48 billion in assets, Vanguard Total World Stock ETF has $31.94 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.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report