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

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Launched on 06/19/2006, the First Trust Dow Jones Internet ETF (FDN) is a passively managed exchange traded fund designed to provide a 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.

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 9, placing it in bottom 44%.

Index Details

The fund is sponsored by First Trust Advisors. It has amassed assets over $4.34 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

Investors should also pay attention to an ETF’s expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain 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

ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund’s holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Information Technology sector–about 55.20% of the portfolio. Telecom and Consumer Discretionary round out the top three.

Looking at individual holdings, Amazon.com, Inc. (AMZN) accounts for about 9.78% of total assets, followed by Meta Platforms Inc. (class A) (FB) and Alphabet Inc. (class A) (GOOGL).

The top 10 holdings account for about 49.55% of total assets under management.

Performance and Risk

Year-to-date, the First Trust Dow Jones Internet ETF has lost about -39.75% so far, and is down about -42.82% over the last 12 months (as of 07/20/2022). FDN has traded between $122.23 and $252.25 in this past 52-week period.

The ETF has a beta of 1.13 and standard deviation of 31.76% 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 sufficient 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 $581.58 million in assets, ARK Next Generation Internet ETF has $1.47 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
 
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