The First Trust Materials AlphaDEX ETF (FXZ) was launched on 05/08/2007, and is a passively managed exchange traded fund designed to offer broad exposure to the Materials - Broad segment of the equity market.

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.

Sector ETFs also provide investors access to a broad group of companies in particular sectors that offer low risk and diversified exposure. Materials - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 15, placing it in bottom 6%.

Index Details

The fund is sponsored by First Trust Advisors. It has amassed assets over $428.75 million, making it one of the average sized ETFs attempting to match the performance of the Materials - Broad segment of the equity market. FXZ seeks to match the performance of the StrataQuant Materials Index before fees and expenses.

The StrataQuant Materials Index is a modified equal-dollar weighted index designed by the AMEX to objectively identify and select stocks from the Russell 1000 Index that may generate positive alpha relative to traditional passive style indices through the use of the AlphaDEX screening methodology.

Costs

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 counterparts, other things remaining the same.

Annual operating expenses for this ETF are 0.62%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 1.98%.

Sector Exposure and Top Holdings

ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Materials sector--about 91.50% of the portfolio.

Looking at individual holdings, United States Steel Corporation (X) accounts for about 5.30% of total assets, followed by Steel Dynamics, Inc. (STLD) and Nucor Corporation (NUE).

The top 10 holdings account for about 43.05% of total assets under management.

Performance and Risk

The ETF has lost about -0.52% and is up about 8.13% so far this year and in the past one year (as of 03/12/2024), respectively. FXZ has traded between $57.64 and $70 during this last 52-week period.

The ETF has a beta of 1.24 and standard deviation of 24.89% for the trailing three-year period, making it a medium risk choice in the space. With about 40 holdings, it has more concentrated exposure than peers.