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Should You Invest in the First Trust Dow Jones Internet ETF (FDN)?

Sector ETF report for FDN

By
This story originally appeared on Zacks

Looking for broad exposure to the Technology - Internet segment of the equity market? You should consider the First Trust Dow Jones Internet ETF (FDN), a passively managed exchange traded fund launched on 06/19/2006.

- Zacks

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they 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. Technology - Internet is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 7, placing it in top 44%.

Index Details

The fund is sponsored by First Trust Advisors. It has amassed assets over $11.13 billion, making it one of the largest ETFs attempting to match the performance of the Technology - Internet segment of the equity market. FDN seeks to match the performance of the Dow Jones Internet Composite Index before fees and expenses.

The Dow Jones Internet Composite Index includes only companies whose primary focus is Internet-related. For inclusion in the Index, a company must generate at least 50% of its revenues from Internet commerce or services & must currently be included in the Dow Jones US Index. The Index is divided between two types of Internet companies -- Internet commerce companies & Internet services companies.

Costs

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for this ETF are 0.51%, making it on par with most peer products in the space.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Information Technology sector--about 42.70% of the portfolio. Telecom and Consumer Discretionary round out the top three.

Looking at individual holdings, Amazon.com, Inc. (AMZN) accounts for about 9.47% of total assets, followed by Facebook, Inc. (class A) (FB) and Alphabet Inc. (class A) (GOOGL).

The top 10 holdings account for about 51.76% of total assets under management.

Performance and Risk

So far this year, FDN has gained about 18.42%, and is up roughly 21.07% in the last one year (as of 11/09/2021). During this past 52-week period, the fund has traded between $190.63 and $252.25.

The ETF has a beta of 1.01 and standard deviation of 27.09% for the trailing three-year period, making it a high risk choice in the space. With about 42 holdings, it has more concentrated exposure than peers.

Alternatives

First Trust Dow Jones Internet ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, FDN is an outstanding option for investors seeking exposure to the Technology ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

Amplify Transformational Data Sharing ETF (BLOK) tracks ---------------------------------------- and the ARK Next Generation Internet ETF (ARKW) tracks N/A. Amplify Transformational Data Sharing ETF has $1.72 billion in assets, ARK Next Generation Internet ETF has $5.60 billion. BLOK has an expense ratio of 0.71% and ARKW charges 0.79%.

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 Dow Jones Internet ETF (FDN): ETF Research Reports

 

Amazon.com, Inc. (AMZN): Free Stock Analysis Report

 

Meta Platforms Inc. (FB): Free Stock Analysis Report

 

Alphabet Inc. (GOOGL): Free Stock Analysis Report

 

ARK Next Generation Internet ETF (ARKW): ETF Research Reports

 

Amplify Transformational Data Sharing ETF (BLOK): ETF Research Reports

 

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