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Designed to provide broad exposure to the Technology ETFs category of the market, the First Trust NASDAQ Semiconductor ETF (FTXL) is a smart beta exchange traded fund launched on 09/20/2016.

What Are Smart Beta ETFs?

For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.

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.

If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.

These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.

Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.

Fund Sponsor & Index

The fund is sponsored by First Trust Advisors. It has amassed assets over $1.67 billion, making it one of the larger ETFs in the Technology ETFs. This particular fund, before fees and expenses, seeks to match the performance of the Nasdaq US Smart Semiconductor Index.

The Nasdaq US Smart Semiconductor Index is a modified factor weighted index, designed to provide exposure to US companies within the semiconductor industry.

Cost & Other Expenses

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.

With on par with most peer products in the space, this ETF has annual operating expenses of 0.60%.

FTXL's 12-month trailing dividend yield is 0.48%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

FTXL's heaviest allocation is in the Information Technology sector, which is about 100% of the portfolio.

Looking at individual holdings, Nvidia Corporation (NVDA) accounts for about 11.17% of total assets, followed by Qualcomm Incorporated (QCOM) and Applied Materials, Inc. (AMAT).

Its top 10 holdings account for approximately 62.78% of FTXL's total assets under management.

Performance and Risk

The ETF has added about 28.89% and is up about 53.03% so far this year and in the past one year (as of 07/10/2024), respectively. FTXL has traded between $62.18 and $104.88 during this last 52-week period.

The ETF has a beta of 1.26 and standard deviation of 32.55% for the trailing three-year period. With about 32 holdings, it has more concentrated exposure than peers.

Alternatives

First Trust NASDAQ Semiconductor ETF is an excellent option for investors seeking to outperform the Technology ETFs segment of the market. There are other ETFs in the space which investors could consider as well.

IShares Semiconductor ETF (SOXX) tracks PHLX SOX Semiconductor Sector Index and the VanEck Semiconductor ETF (SMH) tracks MVIS US Listed Semiconductor 25 Index. IShares Semiconductor ETF has $15.86 billion in assets, VanEck Semiconductor ETF has $23.84 billion. SOXX has an expense ratio of 0.35% and SMH charges 0.35%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Technology ETFs.

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 NASDAQ Semiconductor ETF (FTXL): ETF Research Reports

QUALCOMM Incorporated (QCOM) : Free Stock Analysis Report

NVIDIA Corporation (NVDA) : Free Stock Analysis Report

Applied Materials, Inc. (AMAT) : Free Stock Analysis Report

VanEck Semiconductor ETF (SMH): ETF Research Reports

iShares Semiconductor ETF (SOXX): ETF Research Reports

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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.