Should First Trust Small Cap Growth AlphaDEX ETF (FYC) Be on Your Investing Radar?

The First Trust Small Cap Growth AlphaDEX ETF (FYC) was launched on April 19, 2011, and is a passively managed exchange traded fund designed to offer broad exposure to the Small Cap Growth segment of the US equity market.

The fund is sponsored by First Trust Advisors. It has amassed assets over $1.36 billion, making it one of the average sized ETFs attempting to match the Small Cap Growth segment of the US equity market.

Why Small Cap Growth

Sitting at a market capitalization below $2 billion, small cap companies tend to be high-potential stocks compared to its large and mid cap counterparts, but come with higher risk.

Qualities of growth stocks include faster growth rates compared to the broader market, as well as higher valuations and higher than average sales and earnings growth rates. Something to keep in mind is the higher level of volatility that is affiliated with growth stocks. Even though growth stocks are more likely to outperform their value counterparts in strong bull markets, value stocks have a record of delivering better returns in almost all markets than growth stocks.

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 0.7%, making it one of the more expensive products in the space.

It has a 12-month trailing dividend yield of 0.17%.

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 to the Healthcare sector -- about 26.9% of the portfolio. Industrials and Information Technology round out the top three.

Looking at individual holdings, Acadian Asset Management Inc. (AAMI) accounts for about 0.72% of total assets, followed by First Advantage Corporation (FA) and Oscar Health, Inc. (class A) (OSCR).

The top 10 holdings account for about 6.91% of total assets under management.

Performance and Risk

FYC seeks to match the performance of the Nasdaq AlphaDEX Small Cap Growth Index before fees and expenses. The NASDAQ AlphaDEX Small Cap Growth Index is an enhanced which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 700 Small Cap Growth Index.

The ETF has gained about 29.03% so far this year and is up about 53.57% in the last one year (as of 08/06/2026). In the past 52-week period, it has traded between $80.96 and $127.34.

The ETF has a beta of 1.17 and standard deviation of 21.8% for the trailing three-year period, making it a high risk choice in the space. With about 265 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust Small Cap Growth AlphaDEX ETF sports a Zacks ETF Rank of 4 (Sell), which is based on expected asset class return, expense ratio, and momentum, among other factors. FYC, then, is not the best option for investors seeking exposure to the Style Box - Small Cap Growth segment of the market. Instead, there are better ETFs in the space to consider.

The iShares Russell 2000 Growth ETF (IWO) and the Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) track a similar index. While iShares Russell 2000 Growth ETF has $14.78 billion in assets, Vanguard Small-Cap Growth Index Fund ETF Shares has $24.02 billion. IWO has an expense ratio of 0.24% and VBK charges 0.05%.

Bottom-Line

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.

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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This article originally published on Zacks Investment Research (zacks.com).

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