The First Trust Dow Jones Global Select Dividend ETF (FGD) made its debut on 11/21/2007, and is a smart beta exchange traded fund that provides 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.
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.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
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.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
The fund is managed by First Trust Advisors, and has been able to amass over $363.23 million, which makes it one of the average sized ETFs in the Broad Developed World ETFs. Before fees and expenses, FGD 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
For ETF investors, expense ratios are an important factor when considering a fund’s return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Annual operating expenses for FGD are 0.59%, which makes it one of the more expensive products in the space.
The fund has a 12-month trailing dividend yield of 6.95%.
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, Bankia, S.a. (BKIA.SM) accounts for about 2.34% of total assets, followed by Yue Yuen Industrial (holdings) Limited (551.HK) and Centurylink, Inc. (CTL).
The top 10 holdings account for about 15.18% of total assets under management.
Performance and Risk
The ETF has lost about -20.54% and is down about -9.53% so far this year and in the past one year (as of 10/12/2020), respectively. FGD has traded between $13.90 and $25.20 during this last 52-week period.
FGD has a beta of 0.96 and standard deviation of 24.07% for the trailing three-year period, which makes the fund a low risk choice in the space. With about 96 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Dow Jones Global Select Dividend ETF is not a suitable option for investors seeking to outperform the Broad Developed World ETFs segment of the market. Instead, there are other ETFs in the space which investors should 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 $13.04 billion in assets, Vanguard Total World Stock ETF has $14.63 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.
First Trust Dow Jones Global Select Dividend ETF (FGD): ETF Research Reports
iShares MSCI ACWI ETF (ACWI): ETF Research Reports
Vanguard Total World Stock ETF (VT): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
