Should You Invest in the First Trust Materials AlphaDEX ETF (FXZ)?

Core Viewpoint - The First Trust Materials AlphaDEX ETF (FXZ) is a passively managed ETF that provides broad exposure to the Materials - Broad segment of the equity market, appealing to both institutional and retail investors due to its low costs and tax efficiency [1][2]. Group 1: Fund Overview - Launched on May 8, 2007, FXZ has accumulated over $221.67 million in assets, positioning it as an average-sized ETF in its category [3]. - FXZ aims to match the performance of the StrataQuant Materials Index, which uses a modified equal-dollar weighted methodology to select stocks from the Russell 1000 Index [4]. Group 2: Costs and Performance - The ETF has an annual operating expense ratio of 0.61% and a 12-month trailing dividend yield of 1.78%, making it competitive with peer products [5]. - As of July 30, 2025, FXZ has gained approximately 6.47% year-to-date but is down about 8% over the past year, with a trading range between $46.76 and $67.64 [8]. Group 3: Sector Exposure and Holdings - FXZ has a significant allocation in the Materials sector, comprising about 84% of the portfolio, with Eastman Chemical Company (EMN) being the largest holding at approximately 4.84% of total assets [6][7]. - The top 10 holdings represent about 44.65% of total assets under management, indicating a concentrated exposure compared to peers [7][8]. Group 4: Alternatives and Market Position - FXZ carries a Zacks ETF Rank of 3 (Hold), suggesting it is a viable option for investors seeking exposure to the Materials sector [9]. - Other alternatives include the FlexShares Morningstar Global Upstream Natural Resources ETF (GUNR) and the Materials Select Sector SPDR ETF (XLB), which have significantly larger asset bases of $4.86 billion and $5.38 billion, respectively [10].