The First Trust Growth Strength ETF (FTGS) made its debut on 10/25/2022, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - Large Cap Growth category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
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
Managed by First Trust Advisors, FTGS has amassed assets over $878.90 million, making it one of the average sized ETFs in the Style Box - Large Cap Growth. FTGS seeks to match the performance of the THE GROWTH STRENGTH INDEX before fees and expenses.
The Growth Strength Index provides exposure to a mix of domestic equities with filters for liquidity, return on equity, long-term debt, revenue and cash flow growth.
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 0.60% for FTGS, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 0.38%.
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.
FTGS's heaviest allocation is in the Financials sector, which is about 26.10% of the portfolio. Its Information Technology and Industrials round out the top three.
Taking into account individual holdings, Deckers Outdoor Corporation (DECK) accounts for about 2.42% of the fund's total assets, followed by Cadence Design Systems, Inc. (CDNS) and Netflix, Inc. (NFLX).
FTGS's top 10 holdings account for about 22.52% of its total assets under management.
Performance and Risk
So far this year, FTGS has added roughly 17.82%, and is up about 18.30% in the last one year (as of 12/25/2024). During this past 52-week period, the fund has traded between $26.46 and $33.31.
FTGS has a beta of 1.13 and standard deviation of 15.96% for the trailing three-year period. With about 51 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Growth Strength ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Growth segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Growth ETF (VUG) tracks CRSP U.S. Large Cap Growth Index and the Invesco QQQ (QQQ) tracks NASDAQ-100 Index. Vanguard Growth ETF has $159.56 billion in assets, Invesco QQQ has $328.60 billion. VUG has an expense ratio of 0.04% and QQQ charges 0.20%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Growth.
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.
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Get it free >>First Trust Growth Strength ETF (FTGS): ETF Research Reports
Netflix, Inc. (NFLX) : Free Stock Analysis Report
Deckers Outdoor Corporation (DECK) : Free Stock Analysis Report
Cadence Design Systems, Inc. (CDNS) : Free Stock Analysis Report
Invesco QQQ (QQQ): ETF Research Reports
Vanguard Growth ETF (VUG): 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.
