Investing in a Broad-Based ETF with a Focus

Doug Fabian

Doug Fabian is known for his expert knowledge of ETFs, bear funds and enhanced index funds to profit in any market climate.

Last week, I began my new series on promising exchange-traded funds (ETFs) for growth-oriented investors with a look at the benchmark health care ETF, XLV. This week, I’d like to move in different direction by featuring the First Trust Dorsey Wright Focus 5 ETF (FV). FV is a “fund of funds” that reaches into some of the top-performing sectors of the market, including, but not limited to, biotech, Internet, healthcare and consumer staples.

FV uses a “strength model” based on the Dorsey Wright Focus Five Index to make bets in some of the strongest market sectors. First Trust picks five sector- and industry-based ETFs from its list of plays that its fund manager expects to offer the best chance of beating competitor ETFs. The five ETFs that are chosen then are equally weighted within the fund, with a selected ETF remaining until it drops below the average level of strength. This measure is designed to reduce the number of ETFs rotating in and out of the fund.

View the current price, volume, performance and top 10 holdings of FV at ETFU.com.

A look at FV’s chart for only the first month of 2016 might be a little alarming to some investors, as the fund has fallen more than 10% since the year began. However, with nearly 75% of its investments in health care, consumer cyclicals and technology sectors, FV is on fairly stable ground. It currently is down less than 4% from prices at the end of 2014. FV pays a small dividend yield, only 0.16%, and its expense ratio sits at 0.94%. The fund has nearly $4 billion in assets managed.

ETF Talk FV

As a fund that focuses primarily on its five First Trust sector- and industry-focused ETFs, FV is not as concentrated in its biggest holdings as many other ETFs. FV’s top 10 holdings comprise a mere 13% of the fund’s weighting. The top three are Facebook, 2.17%; Amazon, 2.13% and Nektar Therapeutics, 1.20%.

Exclusive  FLYING WITH A TAILWIND

The five “First Trust” ETFs currently held in FV are: NYSE Arca Biotech ETF, Dow Jones Internet ETF, Health Care AlphaDEX ETF, Consumer Staples AlphaDEX ETF and Consumer Discretionary AlphaDEX ETF.

If you believe that a multi-sector approach is a good way to handle the market right now, then the First Trust Dorsey Wright Focus 5 ETF (FV) could be a good “all-in-one” investment.

Remember to look for the current price, volume, performance and top 10 holdings of FV at ETFU.com.

If you want my advice about buying and selling specific ETFs, including appropriate exit points, please consider subscribing to my Successful ETF Investing newsletter.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an e-mail. You just may see your question answered in a future ETF Talk.

 

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