If you're interested in broad exposure to the Materials - Broad segment of the equity market, look no further than the First Trust Materials AlphaDEX ETF (FXZ), a passively managed exchange traded fund launched on 05/08/2007.

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

Sector ETFs are also funds of convenience, offering many ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Materials - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 15, placing it in bottom 6%.

Index Details

The fund is sponsored by First Trust Advisors. It has amassed assets over $234.02 million, making it one of the average sized ETFs attempting to match the performance of the Materials - Broad segment of the equity market. FXZ seeks to match the performance of the StrataQuant Materials Index before fees and expenses.

The StrataQuant Materials 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.

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 0.61%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 1.49%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Materials sector--about 91.20% of the portfolio.

Looking at individual holdings, Nucor Corporation (NUE) accounts for about 5.40% of total assets, followed by Steel Dynamics, Inc. (STLD) and Eastman Chemical Company (EMN).

The top 10 holdings account for about 45.43% of total assets under management.

Performance and Risk

Year-to-date, the First Trust Materials AlphaDEX ETF has lost about -1.54% so far, and is down about -18.81% over the last 12 months (as of 03/24/2025). FXZ has traded between $54.79 and $72.04 in this past 52-week period.

The ETF has a beta of 1.20 and standard deviation of 23.40% for the trailing three-year period, making it a medium risk choice in the space. With about 36 holdings, it has more concentrated exposure than peers.

Alternatives

First Trust Materials AlphaDEX ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, FXZ is a sufficient option for those seeking exposure to the Materials ETFs area of the market. Investors might also want to consider some other ETF options in the space.

FlexShares Morningstar Global Upstream Natural Resources ETF (GUNR) tracks Morningstar Global Upstream Natural Resources Index and the Materials Select Sector SPDR ETF (XLB) tracks Materials Select Sector Index. FlexShares Morningstar Global Upstream Natural Resources ETF has $4.93 billion in assets, Materials Select Sector SPDR ETF has $5.34 billion. GUNR has an expense ratio of 0.46% and XLB charges 0.08%.

Bottom Line

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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First Trust Materials AlphaDEX ETF (FXZ): ETF Research Reports

Steel Dynamics, Inc. (STLD) : Free Stock Analysis Report

Nucor Corporation (NUE) : Free Stock Analysis Report

Eastman Chemical Company (EMN) : Free Stock Analysis Report

Materials Select Sector SPDR ETF (XLB): ETF Research Reports

FlexShares Morningstar Global Upstream Natural Resources ETF (GUNR): ETF Research Reports

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

Zacks Investment Research