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

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

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.

Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.

On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.

This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.

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

Because the fund has amassed over $411.2 million, this makes it one of the average sized ETFs in the Style Box - All Cap Growth. FAD is managed by First Trust Advisors. Before fees and expenses, FAD seeks to match the performance of the Nasdaq AlphaDEX Multi Cap Growth Index.

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

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for FAD are 0.63%, which makes it on par with most peer products in the space.

It's 12-month trailing dividend yield comes in at 0.09%.

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 Industrials sector - about 27.1% of the portfolio. Information Technology and Healthcare round out the top three.

Looking at individual holdings, Seagate Technology Holdings Plc (STX) accounts for about 0.66% of total assets, followed by Ftai Aviation Ltd. (FTAI) and Lam Research Corporation (LRCX).

FAD's top 10 holdings account for about 5.51% of its total assets under management.

Performance and Risk

The ETF has gained about 4.07% so far this year and was up about 23.22% in the last one year (as of 03/02/2026). In the past 52-week period, it has traded between $114.67 and $171.35

FAD has a beta of 1.15 and standard deviation of 18.37% for the trailing three-year period, which makes the fund 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 $2.84 billion in assets, iShares Core S&P U.S. Growth ETF has $26.92 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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