First Trust Consumer Disc AlphaDEXFXD

Morningstar Rating

ETF Research and Analysis

by Robert Goldsborough

Suitability
First Trust Consumer Discretionary AlphaDEX FXD should be treated as a complementary satellite holding to a diversified portfolio. This exchange-traded fund, which holds a variety of names tied to discretionary consumer Read more

Bull Case

Consumer confidence has been on the rise.

This ETF offers much more of a mid-cap tilt than do other consumer discretionary ETFs. As such, we believe it provides purer exposure to the U.S. consumer discretionary sector than do some of its peers, whose holdings include firms with meaningful overseas businesses.

Some consumer discretionary firms have begun boosting dividends and increasing their share repurchase programs, both of which are higher-return propositions for investors than simply keeping cash on the sidelines. Read more

Bear Case

Aside from being heavily dependent on disposable household income and consumer spending, the firms in this portfolio are also susceptible to changes in demographics and fickle consumer tastes.

This ETF has meaningfully underperformed traditional cap-weighted ETFs in recent years.

This ETF’s expense ratio is relatively high for a sector ETF. Read more