Investment Education

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

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.

Investor-friendly, sector ETFs provide many options to gain low risk and diversified exposure to a broad group of companies in particular sectors. Materials - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 9, placing it in bottom 44%.

Index Details

The fund is sponsored by First Trust Advisors. It has amassed assets over $264.88 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

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.

Annual operating expenses for this ETF are 0.61%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 1.71%.

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.

This ETF has heaviest allocation in the Materials sector--about 91.90% of the portfolio.

Looking at individual holdings, United States Steel Corporation (X) accounts for about 5.38% of total assets, followed by Reliance Inc. (RS) and Steel Dynamics, Inc. (STLD).

The top 10 holdings account for about 45.07% of total assets under management.

Performance and Risk

The ETF has added roughly 5.88% so far this year and is down about -6.19% in the last one year (as of 01/21/2025). In that past 52-week period, it has traded between $56.14 and $72.04.

The ETF has a beta of 1.20 and standard deviation of 23.94% for the trailing three-year period, making it a medium risk choice in the space. With about 37 holdings, it has more concentrated exposure than peers.