If you’re interested in broad exposure to the Technology – Internet segment of the equity market, look no further than the First Trust Dow Jones Internet ETF (FDN), a passively managed exchange traded fund launched on 06/19/2006.
Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.
Sector ETFs are also funds of convenience, offering many 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 5, placing it in top 31%.
Index Details
The fund is sponsored by First Trust Advisors. It has amassed assets over $5.81 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.
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 0.52%, making it on par with most peer products in the space.
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 Information Technology sector–about 40.70% of the portfolio. Telecom and Consumer Discretionary round out the top three.
Looking at individual holdings, Amazon.com, Inc. (AMZN) accounts for about 10.08% of total assets, followed by Meta Platforms Inc. (class A) (META) and Netflix, Inc. (NFLX).
The top 10 holdings account for about 53.69% of total assets under management.
Performance and Risk
The ETF return is roughly 3.41% so far this year and it’s up approximately 34.02% in the last one year (as of 04/22/2024). In that past 52-week period, it has traded between $137.79 and $207.84.
The ETF has a beta of 1.12 and standard deviation of 30.09% 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.
Invesco NASDAQ Internet ETF (PNQI) tracks NASDAQ Internet Index and the ARK Next Generation Internet ETF (ARKW) tracks N/A. Invesco NASDAQ Internet ETF has $721.41 million in assets, ARK Next Generation Internet ETF has $1.50 billion. PNQI has an expense ratio of 0.60% and ARKW charges 0.88%.
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
Netflix, Inc. (NFLX) : Free Stock Analysis Report
ARK Next Generation Internet ETF (ARKW): ETF Research Reports
Invesco NASDAQ Internet ETF (PNQI): ETF Research Reports
Meta Platforms, Inc. (META) : Free Stock Analysis Report