The First Trust NASDAQ Semiconductor ETF (FTXL) made its debut on 09/20/2016, and is a smart beta exchange traded fund that provides broad exposure to the Technology ETFs category of the market.

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.

Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.

However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.

Fund Sponsor & Index

The fund is managed by First Trust Advisors, and has been able to amass over $1.31 billion, which makes 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%.

It's 12-month trailing dividend yield comes in at 0.59%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. 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.

Taking into account individual holdings, Nvidia Corporation (NVDA) accounts for about 11.16% of the fund's total assets, followed by Broadcom Inc. (AVGO) and Qualcomm Incorporated (QCOM).

Its top 10 holdings account for approximately 62.14% of FTXL's total assets under management.

Performance and Risk

The ETF return is roughly 4.33% and is up about 22.47% so far this year and in the past one year (as of 09/11/2024), respectively. FTXL has traded between $62.18 and $107.11 during this last 52-week period.

The fund has a beta of 1.25 and standard deviation of 34.57% 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 $13.42 billion in assets, VanEck Semiconductor ETF has $20.59 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

Broadcom Inc. (AVGO) : Free Stock Analysis Report

VanEck Semiconductor ETF (SMH): ETF Research Reports

iShares Semiconductor ETF (SOXX): ETF Research Reports

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