FXO Profile
The First Trust Financials AlphaDEX Fund is designed to offer investors targeted exposure to the financial sector by investing primarily in common stocks and real estate investment trusts (REITs) that are part of its underlying index. Under normal market conditions, the fund allocates at least 90% of its net assets, including any borrowed funds, to these securities. The investment strategy focuses on capturing the performance of financial services companies, leveraging the funds commitment to the underlying index to achieve its investment objectives.
The underlying index for the fund is a modified equal-dollar weighted index that selects stocks from the Russell 1000 Index specifically within the financial services sector. This index utilizes the AlphaDEX selection methodology, which aims to identify and select stocks based on factors such as growth, value, and volatility. The methodology is designed to potentially generate positive alpha, which means delivering returns that exceed those of traditional passive indices that do not employ such active selection criteria.
The AlphaDEX selection process is intended to enhance investment outcomes by focusing on stocks that meet specific criteria deemed favorable for outperforming traditional benchmarks. This approach involves analyzing various financial metrics and performance indicators to identify stocks with the potential for higher returns. By concentrating on the financial sector, the fund provides investors with exposure to a segment of the market that includes major banks, insurance companies, and other financial institutions.
As a sector-focused fund, the First Trust Financials AlphaDEX Fund may exhibit higher levels of concentration compared to more diversified funds, which can result in increased potential for higher returns but also heightened risk associated with sector-specific volatility. The funds strategy and index construction are aimed at capitalizing on opportunities within the financial sector, aligning with its objective to deliver superior performance through a targeted investment approach.
|
