AlphaDEX Methodology ETFs

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Average returns in this Category	3 months return	6 months return	12 months return	YTD return

AlphaDEX Methodology	16.41%	54.71%	-11.43%	29.67%

Ticker SPY	Name	3 months return	6 months return	12 months return	YTD return

FXD	First Trust Consumer Discretionary AlphaDEX Fund	20.61%	74.34%	-7.81%	44.5%

FXG	First Trust Consumer Staples AlphaDEX Fund	14.31%	30.95%	-6.64%	20.21%

FXN	First Trust Energy AlphaDEX Fund	9.98%	61.15%	-27.79%	32.22%

FXO	First Trust Financial AlphaDEX Fund	20.55%	71.74%	-8.85%	25.8%

FXH	First Trust Health Care AlphaDEX Fund	25.05%	42.9%	1.85%	35.2%

FXR	First Trust Industrials AlphaDEX Fund	20.39%	60.52%	-17.09%	29.58%

FEX	First Trust Large Cap Core AlphaDEX Fund	13.59%	45.49%	-14.38%	24.06%

FTC	First Trust Large Cap Growth Opportunities AlphaDEX Fund	15.42%	31.64%	-15.53%	17.78%

FTA	First Trust Large Cap Value Opportunities AlphaDEX Fund	11.89%	58.82%	-14.37%	26.92%

FXZ	First Trust Materials AlphaDEX Fund	18.97%	79.31%	-14.43%	43.87%

FNX	First Trust Mid Cap Core AlphaDEX Fund	17.8%	61.56%	-9.35%	35.14%

FAD	First Trust Multi Cap Growth AlphaDEX Fund	17.08%	37.6%	-14.15%	19.22%

FAB	First Trust Multi Cap Value AlphaDEX Fund	14.97%	67.35%	-6.65%	35.55%

FYX	First Trust Small Cap Core AlphaDEX Fund	17.3%	64.04%	-9.42%	28.29%

FXL	First Trust Technology AlphaDEX Fund	19.4%	58.33%	-5.08%	47.72%

FXU	First Trust Utilities AlphaDEX Fund	5.23%	29.65%	-13.14%	8.64%


	About AlphaDEX Methodology ETFs
ALPHADEX ETFs: Overview and forecast ALPHADEX ETFs are based on what could be called the fundamental ETF methodology, but work on improving the purely index based returns. They've been doing that, too. Since March 2009, they've been staging a quite respectable mini recovery of their own, in some cases. That will be a relief for their investors, because the ALPHADEX ETFs went over a cliff, in the 2008 meltdown. These ETFS aren't comprised of radical investment strategies or asset mixes. They're the solid citizens of their class, and contain mixes of consumer staples and index standards. They could be considered a good photo album of how the classic middle class stocks were nuked by the markets. Their actual mixes are very much the low risk, balanced mix approach. That may be why they're relatively un-dramatic trading performers in normal markets. The wild ride of the last year was hardly typical of their normal behavior in the bull market, which was comparatively sedate, bordering on conservative-archetypal. The ALPHADEX ETFs are part of a group called the First Trust Family, introduced with some panache in 2007, just before the asteroid hit the US housing market. At this point, ETFs were becoming an item in market consciousness, and the ALPHADEX ETFs were the new, respectable, face of the ETF paradigm. They're still respectable investments, but the current market is hardly their ideal environment. They're vulnerable to this situation, where the consumer markets are seriously depressed, and capital investment is, naturally, looking for major returns. It's a measure of their respectability that they've staged their comeback, even if they're still well below their peaks. Short term (6 months) These ETFs can reasonably be said to be undervalued, based largely on their very strong, ultra basic motif and methods, and they've shown some stamina and trading value in their recent performance since March 2009. They're not by any stretch the worst choice on the block. There would have to be reservations, however, about the trading issue in terms of volumes. Some of these ETFs trade very well, but it's a matter of opinion if they're day trader material. The "T" in ETFs does stand for "Traded", and relative to values, they can be sluggish, in comparison to other ETFs and stocks. That said, it's also fair to say that people looking for value and quality at undervalued prices won't mind a bit of time to do their numbers. Mid term (2 years) The mid term is where the ALPHADEX ETFs are likely to get at least one laugh. The current values could well turn out to be a good deal going begging. That, ironically, is a sort of slow motion version of the way these ETFs work. They have their own ways of dealing with their asset values, and as assets, they have the sort of solid content which works like a family home. The prices move around over the years, but the overall move is upward, and over time, it can go up pretty drastically. Two years might not be a very good measure of performance. The unnatural state of the markets, the US domestic economy, and the battered global economic concept, aren't likely to help the baseline of the consumer market stocks that form the home ground of the ALPHADEX ETFs. It would be worth keeping an eye on their movements, however, because these are ETFs which can work like measures of those economic elements. Not many investment vehicles are locked in to such fundamentals. Long term (5 years) It's fair to say that the ALPHADEX ETFs can expect to be "discovered" by the markets at some point. In five years, it should be possible for the most shallow minded of investment gurus to stumble upon a group of funds which invests in true mainstream stocks. Don't hold your breath, however, in terms of when that will happen. The ALPHADEX ETFs are able to work with a range of assets which in terms of conventional investment strategies, would be considered positively stodgy. These are the sort of stocks which are the antithesis of the melodramatic stock market. As asset percentiles, they're often less than 1%, and rarely above 10%. This is " asset mix" in the true sense of the words. It's a measure of the depth of the market meltdown that these ETFs were hit as hard as they were. They're designed to be unsinkable, from the look of their mixes. Qualifiers to projections No form of investment is risk free, and even a truly watertight design has limits. The ALPHADEX ETFs as a class are an interesting group, as a study. Investors need to look at actual performance, rather than theory, and the market environment, to assess their potentials. These funds have shown a relationship to the domestic economy which is a clear measure of their basic nature. To date, it's been a weakness, in a shattered consumer market. The other side of the coin has yet to be seen. We don't yet know for sure that it will respond strongly to a clear recovery, but it would be consistent with the negative performance of the last two years. Investors are advised to check their margins, and see what might be, but the ALPHADEX ETFs are looking like a class of ETF with a definite place in ETF ideology for the true believers.

Last Updated on: 2010-01-14 02:03:40

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