Is First Trust Technology AlphaDEX ETF (FXL) a Strong ETF Right Now?

Launched on 05/08/2007, the First Trust Technology AlphaDEX ETF (FXL) is a smart beta exchange traded fund offering broad exposure to the Technology ETFs category of the market.

What Are Smart Beta ETFs?

Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.

A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.

If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.

Fund Sponsor & Index

Because the fund has amassed over $2.72 billion, this makes it one of the larger ETFs in the Technology ETFs. FXL is managed by First Trust Advisors. This particular fund, before fees and expenses, seeks to match the performance of the StrataQuant Technology Index.

The StrataQuant Technology Index is a modified equal-dollar weighted index designed by the AMEX to objectively identify and select stocks from the Russell 1000 Index that may generate positive alpha relative to traditional passive style indices through the use of the AlphaDEX screening methodology.

Cost & Other Expenses

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 cousins, other things remaining the same.

Operating expenses on an annual basis are 0.60% for this ETF, which makes it on par with most peer products in the space.

It's 12-month trailing dividend yield comes in at 0.00%.

Sector Exposure and Top Holdings

ETFs offer 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.

For FXL, it has heaviest allocation in the Information Technology sector --about 86.4% of the portfolio --while Industrials and Telecom round out the top three.

Taking into account individual holdings, Cognizant Technology Solutions Corporation (CTSH) accounts for about 1.77% of the fund's total assets, followed by Epam Systems, Inc. (EPAM) and Ptc Inc. (PTC).

Its top 10 holdings account for approximately 16.34% of FXL's total assets under management.

Performance and Risk

The ETF has added roughly 25.83% so far this year and is up roughly 33.02% in the last one year (as of 08/07/2026). In the past 52-week period, it has traded between $152.43 and $224.06

The ETF has a beta of 1.24 and standard deviation of 24.47% for the trailing three-year period, making it a medium risk choice in the space. With about 111 holdings, it effectively diversifies company-specific risk .

Alternatives

First Trust Technology AlphaDEX ETF is an excellent option for investors seeking to outperform the Technology ETFs segment of the market. There are other ETFs in the space which investors could consider as well.

State Street Technology Select Sector SPDR ETF (XLK) tracks Technology Select Sector Index and the Vanguard Information Technology Index Fund ETF Shares (VGT) tracks MSCI US Investable Market Information Technology 25/50 Index. State Street Technology Select Sector SPDR ETF has $122.04 billion in assets, Vanguard Information Technology Index Fund ETF Shares has $146.96 billion. XLK has an expense ratio of 0.08% and VGT changes 0.09%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Technology ETFs

Bottom Line

Boost Your Portfolio with Our Top ETF Insights

Zacks' exclusive Fund Newsletter delivers actionable information, top news and analysis, as well as top-performing ETFs, straight to your inbox every week.

Don’t miss out on this valuable resource. It’s free!

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

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

Zacks Investment Research