A smart beta exchange traded fund, the First Trust Dow Jones Global Select Dividend ETF (FGD) debuted on 11/21/2007, and offers broad exposure to the Broad Developed World 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.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
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.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
Even though this space provides many choices to investors–think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting–not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is managed by First Trust Advisors, and has been able to amass over $624.26 million, which makes it one of the average sized ETFs in the Broad Developed World ETFs. FGD seeks to match the performance of the Dow Jones Global Select Dividend Index before fees and expenses.
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
When considering an ETF’s total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Annual operating expenses for this ETF are 0.57%, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 5.56%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it’s still important for investors to research a fund’s holdings.
Looking at individual holdings, Fortescue Metals Group Limited (FMG.AU) accounts for about 2.51% of total assets, followed by A.p. Moeller – Maersk A/s (class A) (MAERSKA.DC) and Mitsui O.s.k. Lines, Ltd. (9104.JP).
The top 10 holdings account for about 16.39% of total assets under management.
Performance and Risk
The ETF has lost about -4.75% so far this year and is down about -1.92% in the last one year (as of 04/27/2022). In the past 52-week period, it has traded between $23.77 and $27.47.
The fund has a beta of 0.97 and standard deviation of 25.19% for the trailing three-year period, which makes FGD a low risk choice in this particular space. With about 101 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 $17.94 billion in assets, Vanguard Total World Stock ETF has $23.55 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.
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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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