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

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The First Trust Dow Jones Internet ETF (FDN) was launched on 06/19/2006, and is a passively managed exchange traded fund designed to offer broad exposure to the Technology – Internet segment of the equity market.

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.

Investor-friendly, sector ETFs provide many options 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 10, placing it in bottom 38%.

Index Details

The fund is sponsored by First Trust Advisors. It has amassed assets over $4.06 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 0.51%, making it on par with most peer products in the space.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund’s holdings is a valuable exercise. 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 50.80% of the portfolio. Telecom and Consumer Discretionary round out the top three.

Looking at individual holdings, Amazon.com, Inc. (AMZN) accounts for about 9.04% of total assets, followed by Meta Platforms Inc. (class A) (META) and Alphabet Inc. (class A) (GOOGL).

The top 10 holdings account for about 48.63% of total assets under management.

Performance and Risk

The ETF has lost about -39.85% so far this year and is down about -44.80% in the last one year (as of 09/20/2022). In that past 52-week period, it has traded between $122.23 and $250.48.

The ETF has a beta of 1.13 and standard deviation of 32.54% for the trailing three-year period, making it a high risk choice in the space. With about 43 holdings, it has more concentrated exposure than peers.

Alternatives

First Trust Dow Jones Internet ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, FDN is a reasonable option for those seeking exposure to the Technology ETFs area of the market. Investors might also want to consider some other ETF options in the space.

Amplify Transformational Data Sharing ETF (BLOK) tracks —————————————- and the ARK Next Generation Internet ETF (ARKW) tracks N/A. Amplify Transformational Data Sharing ETF has $529.73 million in assets, ARK Next Generation Internet ETF has $1.38 billion. BLOK has an expense ratio of 0.71% and ARKW charges 0.83%.

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
 
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
 
Meta Platforms, Inc. (META) : Free Stock Analysis Report
 
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