Rio Tinto PLC Stock – Should You Invest in the First Trust NASDAQ Clean Edge Smart Grid Infrastructure ETF (GRID)?
Designed to provide broad exposure to the Utilities – Infrastructure segment of the equity market, the First Trust NASDAQ Clean Edge Smart Grid Infrastructure ETF (GRID) is a passively managed exchange traded fund launched on 11/16/2009.
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.
Sector ETFs also provide investors access to a broad group of companies in particular sectors that offer low risk and diversified exposure. Utilities – Infrastructure is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 15, placing it in bottom 6%.
The fund is sponsored by First Trust Advisors. It has amassed assets over $313.43 million, making it one of the average sized ETFs attempting to match the performance of the Utilities – Infrastructure segment of the equity market. GRID seeks to match the performance of the NASDAQ OMX Clean Edge Smart Grid Infrastructure Index before fees and expenses.
The NASDAQ OMX Clean Edge Smart Grid Infrastructure Index includes companies that are primarily engaged and involved in electric grid, electric meters and devices, networks, energy storage and management, and enabling software used by the smart grid infrastructure sector.
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 0.70%, making it the most expensive product in the space.
It has a 12-month trailing dividend yield of 0.60%.
Sector Exposure and Top Holdings
Even 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.
Looking at individual holdings, Johnson Controls International Plc (JCI) accounts for about 8.34% of total assets, followed by Eaton Corporation Plc (ETN) and Abb Ltd (ABBN.SW).
The top 10 holdings account for about 59.87% of total assets under management.
Performance and Risk
Year-to-date, the First Trust NASDAQ Clean Edge Smart Grid Infrastructure ETF has added roughly 11.12% so far, and it’s up approximately 102.09% over the last 12 months (as of 04/19/2021). GRID has traded between $43.70 and $89.55 in this past 52-week period.
The ETF has a beta of 1.20 and standard deviation of 27.62% for the trailing three-year period, making it a high risk choice in the space. With about 71 holdings, it effectively diversifies company-specific risk.
First Trust NASDAQ Clean Edge Smart Grid Infrastructure 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, GRID is a great option for investors seeking exposure to the Utilities/Infrastructure ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.
Global X U.S. Infrastructure Development ETF (PAVE) tracks INDXX U.S. Infrastructure Development Index and the iShares Global Infrastructure ETF (IGF) tracks S&P Global Infrastructure Index. Global X U.S. Infrastructure Development ETF has $2.85 billion in assets, iShares Global Infrastructure ETF has $3.16 billion. PAVE has an expense ratio of 0.47% and IGF charges 0.46%.
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 NASDAQ Clean Edge Smart Grid Infrastructure ETF (GRID): ETF Research Reports
Johnson Controls International plc (JCI): Free Stock Analysis Report
Eaton Corporation, PLC (ETN): Get Free Report
iShares Global Infrastructure ETF (IGF): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.