Is First Trust Multi Cap Growth AlphaDEX ETF (FAD) a Strong ETF Right Now?

Designed to provide broad exposure to the Style Box - All Cap Growth category of the market, the First Trust Multi Cap Growth AlphaDEX ETF (FAD) is a smart beta exchange traded fund launched on 05/08/2007.

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.

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.

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But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.

Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.

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. FAD has been able to amass assets over $279.2 million, making it one of the average sized ETFs in the Style Box - All Cap Growth. This particular fund seeks to match the performance of the Nasdaq AlphaDEX Multi Cap Growth Index before fees and expenses.

The NASDAQ AlphaDEX Multi Cap Growth Index is an enhanced which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 500 Large Cap Index, NASDAQ US 600 Mid Cap Index and NASDAQ US 700 Small Cap Index.

Cost & Other Expenses

When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.

With on par with most peer products in the space, this ETF has annual operating expenses of 0.62%.

FAD's 12-month trailing dividend yield is 0.52%.

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.

For FAD, it has heaviest allocation in the Financials sector --about 19.8% of the portfolio --while Industrials and Information Technology round out the top three.

Taking into account individual holdings, Robinhood Markets, Inc. (class A) (HOOD) accounts for about 0.74% of the fund's total assets, followed by Carvana Co. (class A) (CVNA) and Roblox Corporation (class A) (RBLX).

The top 10 holdings account for about 5.97% of total assets under management.

Performance and Risk

So far this year, FAD return is roughly 3.58%, and is up roughly 17.28% in the last one year (as of 06/26/2025). During this past 52-week period, the fund has traded between $114.67 and $150.30.

The ETF has a beta of 1.13 and standard deviation of 19.55% for the trailing three-year period, making it a medium risk choice in the space. With about 677 holdings, it effectively diversifies company-specific risk .

Alternatives

First Trust Multi Cap Growth AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Growth segment of the market. However, there are other ETFs in the space which investors could consider.

iShares Morningstar Growth ETF (ILCG) tracks MORNINGSTAR US LARGE-MID CP BRD GRWTH ID and the iShares Core S&P U.S. Growth ETF (IUSG) tracks S&P 900 Growth Index. iShares Morningstar Growth ETF has $2.66 billion in assets, iShares Core S&P U.S. Growth ETF has $22.86 billion. ILCG has an expense ratio of 0.04% and IUSG changes 0.04%.

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 - All 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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First Trust Multi Cap Growth AlphaDEX ETF (FAD): ETF Research Reports

This article originally published on Zacks Investment Research (zacks.com).

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