Designed to provide broad exposure to the Mid Cap Growth segment of the US equity market, the First Trust Mid Cap Growth AlphaDEX ETF (FNY) is a passively managed exchange traded fund launched on 04/19/2011.

The fund is sponsored by First Trust Advisors. It has amassed assets over $423.48 million, making it one of the average sized ETFs attempting to match the Mid Cap Growth segment of the US equity market.

Why Mid Cap Growth

Compared to large and small cap companies, mid cap businesses tend to have higher growth prospects and are less volatile, respectively, with market capitalization between $2 billion and $10 billion. These types of companies, then, have a good balance of stability and growth potential.

Growth stocks have higher than average sales and earnings growth rates. While these are expected to grow faster than the broader market, they also have higher valuations. Also, growth stocks are a type of equity that carries more risk compared to others. They are likely to outperform value stocks in strong bull markets but over the longer-term, value stocks have delivered better returns than growth stocks in almost all markets.

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 0.70%, making it one of the most expensive products in the space.

It has a 12-month trailing dividend yield of 0.22%.

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 to the Healthcare sector--about 19.20% of the portfolio. Information Technology and Consumer Discretionary round out the top three.

Looking at individual holdings, Brooks Automation, Inc. (BRKS) accounts for about 0.90% of total assets, followed by Ii-Vi Incorporated (IIVI) and Yeti Holdings, Inc. (YETI).

The top 10 holdings account for about 8.17% of total assets under management.

Performance and Risk

FNY seeks to match the performance of the Nasdaq AlphaDEX Mid Cap Growth Index before fees and expenses. The NASDAQ AlphaDEX Mid Cap Growth Index is an enhanced which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 600 Mid Cap Growth Index.

The ETF has added roughly 11.97% so far this year and it's up approximately 51.62% in the last one year (as of 06/10/2021). In the past 52-week period, it has traded between $44.88 and $74.79.

The ETF has a beta of 1.14 and standard deviation of 26.78% for the trailing three-year period, making it a medium risk choice in the space. With about 226 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust Mid Cap Growth AlphaDEX 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, FNY is a reasonable option for those seeking exposure to the Style Box - Mid Cap Growth area of the market. Investors might also want to consider some other ETF options in the space.

The Vanguard MidCap Growth ETF (VOT) and the iShares Russell MidCap Growth ETF (IWP) track a similar index. While Vanguard MidCap Growth ETF has $10.69 billion in assets, iShares Russell MidCap Growth ETF has $14.79 billion. VOT has an expense ratio of 0.07% and IWP charges 0.24%.

Bottom-Line

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

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 Mid Cap Growth AlphaDEX ETF (FNY): ETF Research Reports
 
IIVI Incorporated (IIVI) : Free Stock Analysis Report
 
Brooks Automation, Inc. (BRKS) : Free Stock Analysis Report
 
iShares Russell MidCap Growth ETF (IWP): ETF Research Reports
 
Vanguard MidCap Growth ETF (VOT): ETF Research Reports
 
YETI Holdings, Inc. (YETI) : Free Stock Analysis Report
 
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