Should You Invest in the First Trust Energy AlphaDEX ETF (FXN)?

Launched on May 8, 2007, the First Trust Energy AlphaDEX ETFFXN-- (FXN) is a passively managed exchange traded fund designed to provide a broad exposure to the Energy - Broad segment of the equity market.

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.

Additionally, sector ETFs offer convenient ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Energy - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 12, placing it in bottom 25%.

Index Details

The fund is sponsored by First Trust Advisors. It has amassed assets over $360.27 million, making it one of the average sized ETFs attempting to match the performance of the Energy - Broad segment of the equity market. FXNFXN-- seeks to match the performance of the StrataQuant Energy Index before fees and expenses.

The StrataQuant Energy Index is a modified equal-dollar weighted index designed by the AMEX to objectively identify and select stocks from the Russell 1000 Index that may generate positive alpha relative to traditional passive style indices through the use of the AlphaDEX screening methodology.

Costs

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

Annual operating expenses for this ETF are 0.63%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 2%.

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.

This ETF has heaviest allocation in the Energy sector -- about 98.1% of the portfolio.

The top 10 holdings account for about 43.78% of total assets under management.

Performance and Risk

The ETF has added about 26.47% and is up roughly 37.88% so far this year and in the past one year (as of 03/16/2026), respectively. FXN has traded between $12.88 and $20.83 during this last 52-week period.

The ETF has a beta of 0.67 and standard deviation of 25.46% for the trailing three-year period, making it a high risk choice in the space. With about 39 holdings, it has more concentrated exposure than peers.

Alternatives

First Trust Energy AlphaDEX ETF sports a Zacks ETF Rank of 4 (Sell), which is based on expected asset class return, expense ratio, and momentum, among other factors. FXN, then, is not the best option for investors seeking exposure to the Energy ETFs segment of the market. However, there are better ETFs in the space to consider.

Vanguard Energy Index Fund ETF Shares (VDE) tracks MSCI US Investable Market Energy 25/50 Index and the State Street Energy Select Sector SPDR ETF (XLE) tracks Energy Select Sector Index. Vanguard Energy Index Fund ETF Shares has $9.53 billion in assets, State Street Energy Select Sector SPDR ETF has $40.29 billion. VDE has an expense ratio of 0.09%, and XLE charges 0.08%.

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

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