Designed to provide broad exposure to the Style Box - Large Cap Growth category of the market, the First Trust Growth Strength ETF (FTGS) is a smart beta exchange traded fund launched on 10/25/2022.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
The fund is managed by First Trust Advisors. FTGS has been able to amass assets over $1.03 billion, making it one of the average sized ETFs in the Style Box - Large Cap Growth. Before fees and expenses, this particular fund seeks to match the performance of the THE GROWTH STRENGTH INDEX .
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.
With one of the more expensive products in the space, this ETF has annual operating expenses of 0.60%.
It's 12-month trailing dividend yield comes in at 0.39%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 25.20% of the portfolio, the fund has heaviest allocation to the Financials sector; Information Technology and Industrials round out the top three.
Taking into account individual holdings, Interactive Brokers Group, Inc. (class A) (IBKR) accounts for about 2.44% of the fund's total assets, followed by Netflix, Inc. (NFLX) and Meta Platforms Inc. (class A) (META).
FTGS's top 10 holdings account for about 22.88% of its total assets under management.
Performance and Risk
Year-to-date, the First Trust Growth Strength ETF has lost about -0.22% so far, and it's up approximately 6.51% over the last 12 months (as of 03/03/2025). FTGS has traded between $28.64 and $33.31 in this past 52-week period.
FTGS has a beta of 1.16 and standard deviation of 15.73% 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 $153.57 billion in assets, Invesco QQQ has $318.45 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
Interactive Brokers Group, Inc. (IBKR) : Free Stock Analysis Report
Invesco QQQ (QQQ): ETF Research Reports
Vanguard Growth ETF (VUG): ETF Research Reports
Meta Platforms, Inc. (META) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
