The First Trust Dow Jones Internet ETF (FDN) was launched on 06/19/2006 and is a passively managed exchange-traded fund designed to provide broad exposure to the Technology – Internet segment of the equity market.
Passively managed ETFs are increasingly popular with institutional and retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long-term investors.
Additionally, sector ETFs offer convenient ways to gain low-risk, diversified exposure to a broad group of companies in particular sectors. Technology – Internet is one of 16 major Zacks sectors within the Zacks Industry Classification. He is currently ranked 5, which puts him in the top 31%.
The fund is sponsored by First Trust Advisors. It has amassed assets of over $3.97 billion, making it one of the largest ETFs attempting to match the performance of the Technology – Internet segment of the stock market. FDN seeks to match the performance of the Dow Jones Internet Composite Index before fees and expenses.
The Dow Jones Internet Composite Index only includes companies whose primary business is related to the Internet.
Investors should also pay attention to an ETF’s expense ratio. Lower cost products will perform better than higher cost ones, assuming all other metrics remain the same.
The annual operating expense of this ETF is 0.51%, putting it on par with most peer products on the market.
Sector exposure and main holdings
Although ETFs provide diversified exposure that minimizes single-stock risk, investors should also examine the actual holdings within the fund. Fortunately, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has the largest allocation to the information technology sector, around 46% of the portfolio. Telecommunications and consumer discretionary round out the top three.
In terms of individual holdings, Amazon.com, Inc. (AMZN) accounts for approximately 9.11% of total assets, followed by Meta Platforms Inc. (Class A) (META) and Cisco Systems, Inc. (CSCO ).
The top 10 holdings represent approximately 49.76% of total assets under management.
Performance and risks
The ETF has added around 11.77% and is down around -27.79% so far this year and over the past year (as of 01/24/2023), respectively. FDN traded between $116.11 and $201.45 during this last 52-week period.
The ETF has a beta of 1.08 and a standard deviation of 34.59% for the three-year period, making it a high-risk pick in the space. With around 43 holdings, it has more concentrated exposure than its peers.
First Trust Dow Jones Internet ETF holds a Zacks ETF rating of 2 (buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. For this reason, FDN is a great option for investors looking to gain exposure to the technology ETF segment of the market. There are other additional ETFs in the space that investors might also consider.
Invesco NASDAQ Internet ETF (PNQI) tracks the NASDAQ Internet Index and ARK Next Generation Internet ETF (ARKW) tracks N/A. Invesco NASDAQ Internet ETF has $496.49 million in assets, ARK Next Generation Internet ETF has $1.20 billion. PNQI has an expense ratio of 0.60% and ARKW charges 0.83%.
To learn more about this product and other ETFs, research products that fit your investment goals, and read articles about the latest developments in the ETF investment 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
Cisco Systems, Inc. (CSCO): Free Inventory 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
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Zacks Investment Research
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.