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

Designed to provide broad exposure to the Small Cap Blend segment of the US equity market, the First Trust Dow Jones Select MicroCap ETF (FDM) is a passively managed exchange traded fund launched on September 27, 2005.The fund is sponsored by First Trust Advisors. It has amassed assets over $202.96 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 BlendWith more potential comes more risk, and small cap companies, with market capitalization below $2 billion, epitomizes this way of thinking.Typically holding a combination of both growth and value stocks, blend ETFs also demonstrate qualities seen in value and growth investments. CostsWhen considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.Annual operating expenses for this ETF are 0.6%, putting it on par with most peer products in the space.It has a 12-month trailing dividend yield of 1.39%.Sector Exposure and Top HoldingsEven though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. 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 41.8% of the portfolio. Consumer Discretionary and Industrials round out the top three.Looking at individual holdings, Stoke Therapeutics, Inc. (STOK) accounts for about 2.69% of total assets, followed by Ameresco, Inc. (class A) (AMRC) and Tetra Technologies, Inc. (TTI).The top 10 holdings account for about 15.06% of total assets under management.Performance and RiskFDM 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 has added roughly 11.55% so far this year and is up roughly 16.75% in the last one year (as of 10/29/2025). In the past 52-week period, it has traded between $55.48 and $77.89.The ETF has a beta of 1.05 and standard deviation of 21.44% for the trailing three-year period, making it a medium risk choice in the space. With about 154 holdings, it effectively diversifies company-specific risk.AlternativesFirst Trust Dow Jones Select MicroCap 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, FDM is a reasonable option for those seeking exposure to the Style Box - Small Cap Blend area of the market. Investors might also want to consider some other ETF options in the space.The iShares Russell 2000 ETF (IWM) and the iShares Core S&P Small-Cap ETF (IJR) track a similar index. While iShares Russell 2000 ETF has $70.20 billion in assets, iShares Core S&P Small-Cap ETF has $86.90 billion. IWM has an expense ratio of 0.19% and IJR charges 0.06%.Bottom-LinePassively 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.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.Boost Your Portfolio with Our Top ETF InsightsZacks' 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!Get it now >>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 First Trust Dow Jones Select MicroCap ETF (FDM): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks