Should you invest in the First Trust Dow Jones Internet ETF (FDN)?

Should you invest in the First Trust Dow Jones Internet ETF (FDN)?

The First Trust Dow Jones Internet ETF (NDAC Free Report) was launched on 06/19/2006 and is a passively managed exchange traded fund designed to provide broad exposure to the Technology – Internet segment of the equity market.

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility and tax efficiency; they are also excellent vehicles for long-term investors.

Investor-friendly sector ETFs offer many options for gaining low-risk, diversified exposure to a broad group of companies in particular sectors. Technology – Internet is one of 16 major Zacks sectors within the Zacks Industry Classification. He is currently ranked 10, which puts him in the bottom 38%.

Index details

The fund is sponsored by First Trust Advisors. It has amassed assets of over $4.06 billion, making it one of the largest ETFs attempting to match the performance of the Technology – Internet segment of the stock market. FDN seeks to match the performance of the Dow Jones Internet Composite Index before fees and expenses.

The Dow Jones Internet Composite Index only includes companies whose primary business is related to the Internet.

Costs

Expense ratios are an important factor in an ETF’s performance and over the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.

The annual operating expense of this ETF is 0.51%, putting it on par with most peer products on the market.

Sector exposure and main holdings

Although ETFs provide diversified exposure, which minimizes single-stock risk, a thorough examination of a fund’s holdings is a valuable exercise. And most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has the largest allocation to the information technology sector, approximately 50.80% of the portfolio. Telecommunications and consumer discretionary round out the top three.

Looking at individual holdings, Amazon.com, Inc. (AMZN Free Report) accounts for approximately 9.04% of total assets, followed by Meta Platforms Inc. (Class A) (META Free Report) and Alphabet Inc. (Class A) (GOOGL free report).

The top 10 holdings represent approximately 48.63% of total assets under management.

Performance and risks

The ETF has lost around -39.85% so far this year and is down around -44.80% over the past year (as of 9/20/2022). In the last 52-week period, it traded between $122.23 and $250.48.

The ETF has a beta of 1.13 and a standard deviation of 32.54% for the three-year period, making it a high-risk pick in the space. With around 43 holdings, it has more concentrated exposure than its peers.

Alternatives

The Dow Jones First Trust Internet ETF has a Zacks ETF rating of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, FDN is a reasonable option for those seeking exposure to the technology ETF sector of the market. Investors could also consider other ETF options in the space.

ETF Amplify Transformational Data Sharing (TO BLOCK Free report) —————————————- tracks and the Internet of new generation ARK ETF (ARKW Free report) N/A tracks. Amplify Transformational Data Sharing ETF has $529.73 million in assets, ARK Next Generation Internet ETF has $1.38 billion. BLOK has an expense ratio of 0.71% and ARKW charges 0.83%.

Conclusion

To learn more about this product and other ETFs, research products that fit your investment goals, and read articles about the latest developments in the ETF investment universe, please visit Zacks ETF Center.


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