Launched on 06/19/2006, the First Trust Dow Jones Internet ETF (FDN) is a passively managed exchange traded fund designed to provide a broad exposure to the Technology - Internet segment of the equity market.
While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.
Sector ETFs also provide investors access to a broad group of companies in particular sectors that offer low risk and diversified exposure. Technology - Internet is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 7, placing it in top 44%.
Index Details
The fund is sponsored by First Trust Advisors. It has amassed assets over $4.18 billion, making it one of the largest ETFs attempting to match the performance of the Technology - Internet segment of the equity market. FDN seeks to match the performance of the Dow Jones Internet Composite Index before fees and expenses.
The Dow Jones Internet Composite Index includes only companies whose primary focus is Internet-related.
Costs
When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.
Annual operating expenses for this ETF are 0.51%, making it on par with most peer products in the space.
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.
This ETF has heaviest allocation in the Information Technology sector--about 41.60% of the portfolio. Telecom and Consumer Discretionary round out the top three.
Looking at individual holdings, Amazon.com, Inc. (AMZN) accounts for about 9.28% of total assets, followed by Meta Platforms Inc. (class A) (META) and Alphabet Inc. (class A) (GOOGL).
The top 10 holdings account for about 52.57% of total assets under management.
Performance and Risk
The ETF has added about 25.12% and is up roughly 9.32% so far this year and in the past one year (as of 05/30/2023), respectively. FDN has traded between $116.11 and $155.93 during this last 52-week period.
The ETF has a beta of 1.12 and standard deviation of 31.70% for the trailing three-year period, making it a high risk choice in the space. With about 43 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust Dow Jones Internet ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, FDN is an excellent option for investors seeking exposure to the Technology ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.
Invesco NASDAQ Internet ETF (PNQI) tracks NASDAQ Internet Index and the ARK Next Generation Internet ETF (ARKW) tracks N/A. Invesco NASDAQ Internet ETF has $541.73 million in assets, ARK Next Generation Internet ETF has $1.21 billion. PNQI has an expense ratio of 0.60% and ARKW charges 0.88%.
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 Dow Jones Internet ETF (FDN): ETF Research Reports
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
Alphabet Inc. (GOOGL) : Free Stock Analysis Report
ARK Next Generation Internet ETF (ARKW): ETF Research Reports
Invesco NASDAQ Internet ETF (PNQI): ETF Research Reports
Meta Platforms, Inc. (META) : Free Stock Analysis Report
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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.
