Should First Trust Dow Jones Select MicroCap ETF (FDM) Be on Your Investing Radar?

Launched on September 27, 2005, the First Trust Dow Jones Select MicroCap ETF (FDM) is a passively managed exchange traded fund designed to provide a broad exposure to the Small Cap Blend segment of the US equity market.

The fund is sponsored by First Trust Advisors. It has amassed assets over $271.32 million, making it one of the average sized ETFs attempting to match the Small Cap Blend segment of the US equity market.

Why Small Cap Blend

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.

Typically holding a combination of both growth and value stocks, blend ETFs also demonstrate qualities seen in value and growth investments.

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 0.6%, making it one of the more expensive products in the space.

It has a 12-month trailing dividend yield of 1.33%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Financials sector -- about 44.6% of the portfolio. Consumer Discretionary and Industrials round out the top three.

Looking at individual holdings, Stoke Therapeutics, Inc. (STOK) accounts for about 2.29% of total assets, followed by Dauch Corporation (DCH) and Gigacloud Technology Inc (class A) (GCT).

The top 10 holdings account for about 15.71% of total assets under management.

Performance and Risk

FDM seeks to match the performance of the Dow Jones Select Microcap Index before fees and expenses. The Dow Jones Select Microcap Index represents microcap stocks that are comparatively liquid and have strong fundamentals relative to the microcap segment as a whole.

The ETF return is roughly 18.45% so far this year and it's up approximately 24.99% in the last one year (as of 09/07/2026). In the past 52-week period, it has traded between $72.19 and $95.69.

The ETF has a beta of 0.95 and standard deviation of 20.4% for the trailing three-year period, making it a medium risk choice in the space. With about 147 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust Dow Jones Select MicroCap ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, FDM is an outstanding option for investors seeking exposure to the Style Box - Small Cap Blend segment of the market. There are other additional ETFs in the space that investors could consider as well.

The Vanguard Morningstar Small-Cap ETF (VB) and the iShares Core S&P Small-Cap ETF (IJR) track a similar index. While Vanguard Morningstar Small-Cap ETF has $81.00 billion in assets, iShares Core S&P Small-Cap ETF has $109.94 billion. VB has an expense ratio of 0.03% and IJR charges 0.06%.

Bottom-Line

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds 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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