Launched on 05/08/2007, the First Trust Health Care AlphaDEX ETF (FXH) is a smart beta exchange traded fund offering broad exposure to the Health Care ETFs category of the market.

What Are Smart Beta ETFs?

Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.

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.

But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.

Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.

The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.

Fund Sponsor & Index

FXH is managed by First Trust Advisors, and this fund has amassed over $1.38 billion, which makes it one of the larger ETFs in the Health Care ETFs. Before fees and expenses, FXH seeks to match the performance of the StrataQuant Health Care Index.

The StrataQuant Health Care Index employs the AlphaDEX stock selection methodology to select stocks from the Russell 1000 Index.

Cost & Other Expenses

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Operating expenses on an annual basis are 0.61% for this ETF, which makes it on par with most peer products in the space.

It's 12-month trailing dividend yield comes in at 0.30%.

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.

FXH's heaviest allocation is in the Healthcare sector, which is about 100% of the portfolio.

When you look at individual holdings, Exact Sciences Corporation (EXAS) accounts for about 2.91% of the fund's total assets, followed by Penumbra, Inc. (PEN) and Universal Health Services, Inc. (class B) (UHS).