Should You Invest in the Fidelity MSCI Industrials Index ETF (FIDU)?

Designed to provide broad exposure to the Industrials - Broad segment of the equity market, the Fidelity MSCI Industrials Index ETF (FIDU) is a passively managed exchange traded fund launched on 10/21/2013.

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. Industrials - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 6, placing it in top 38%.

Index Details

The fund is sponsored by Fidelity. It has amassed assets over $806.34 million, making it one of the average sized ETFs attempting to match the performance of the Industrials - Broad segment of the equity market. FIDU seeks to match the performance of the MSCI USA IMI Industrials Index before fees and expenses.

The MSCI USA IMI Industrials Index represents the performance of the industrial sector in the U.S. equity market.

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 0.08%, making it the least expensive product in the space.

It has a 12-month trailing dividend yield of 1.23%.

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 Industrials sector--about 99.90% of the portfolio.

Looking at individual holdings, Union Pacific Corp Common Stock Usd2.5 (UNP) accounts for about 4.43% of total assets, followed by United Parcel Service Cl B Common Stock Usd.01 (UPS) and Raytheon Technologies Corp Common Stock Usd1.0 (RTX).

The top 10 holdings account for about 31.85% of total assets under management.

Performance and Risk

The ETF has lost about -6% so far this year and is down about -1.02% in the last one year (as of 04/22/2022). In that past 52-week period, it has traded between $49.86 and $57.46.

The ETF has a beta of 1.18 and standard deviation of 26.26% for the trailing three-year period, making it a medium risk choice in the space. With about 367 holdings, it effectively diversifies company-specific risk.

Alternatives

Fidelity MSCI Industrials Index ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, FIDU is a sufficient option for those seeking exposure to the Industrials ETFs area of the market. Investors might also want to consider some other ETF options in the space.

Vanguard Industrials ETF (VIS) tracks MSCI US Investable Market Industrials 25/50 Index and the Industrial Select Sector SPDR ETF (XLI) tracks Industrial Select Sector Index. Vanguard Industrials ETF has $4.64 billion in assets, Industrial Select Sector SPDR ETF has $15.20 billion. VIS has an expense ratio of 0.10% and XLI charges 0.10%.

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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.