ETFs
Should You Invest in the First Trust NASDAQ Clean Edge Smart Grid Infrastructure ETF (GRID)?
Looking for broad exposure to the utilities and infrastructure segment of the equity market? You should consider the First Trust NASDAQ Clean Edge Smart Grid Infrastructure ETF (GRID), a passively managed exchange-traded fund launched on 11/16/2009.
Individual and institutional investors are increasingly turning to passively managed ETFs because they offer low costs, transparency, flexibility and tax efficiency; these types of funds are also excellent vehicles for long-term investors.
Sector ETFs are also commodity funds, offering many ways to gain low-risk, diversified exposure to a broad group of companies in particular industries. Utilities – Infrastructure is one of 16 broad sectors in the Zacks Industry Rank. It currently has a #3 ranking, putting it in the top 19%.
Index details
The fund is sponsored by First Trust Advisors. It has accumulated over $1.49 billion in assets, making it one of the largest ETFs that seek 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 primarily engaged and involved in the electric grid, electric meters and devices, networks, energy storage and management, and enabling software used by the smart grid infrastructure industry.
Costs
Cost is an important factor in choosing the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.
The annual operating expenses of this ETF are 0.57%, which puts it on par with most peers in the sector.
Its 12-month rolling dividend yield is 1.06%.
Sector exposure and main holdings
While ETFs offer diversified exposure that minimizes the risk associated with any one security, it is still important to review a fund’s holdings before investing. Fortunately, most ETFs are highly transparent products that disclose their holdings daily.
Looking at individual holdings, Abb Ltd (ABBN.SW) represents about 8.98% of total assets, followed by Eaton Corporation Plc (ETN) and Schneider Electric Se (SU.FP).
The top 10 stocks represent approximately 56% of total assets under management.
Performance and risk
The ETF has gained about 14.16% and is up about 16.34% year-to-date and over the past year (as of 10/07/2024), respectively. GRID has traded between $85.32 and $121.69 over the past 52-week period.
The ETF has a beta of 1.24 and a standard deviation of 20.79% over the past three years, making it a high-risk pick in this sector. With around 111 stocks, it effectively diversifies company-specific risk.
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Alternatives
First Trust’s NASDAQ Clean Edge Smart Grid Infrastructure ETF is rated #3 (Hold) by Zacks based on the asset class’s expected return, expense ratio and momentum, among other factors. Thus, GRID is a good option for those seeking exposure to the utility/infrastructure ETF sector of the market. Investors may also want to consider other ETF options in this space.
The IShares Global Infrastructure ETF (IGF) tracks the S&P Global Infrastructure Index and the Global X US Infrastructure Development ETF (PAVE) tracks the INDXX US Infrastructure Development Index. The IShares Global Infrastructure ETF has $3.60 billion in assets, the Global X US Infrastructure Development ETF has $7.27 billion. The IGF has an expense ratio of 0.41% and the PAVE charges 0.47%.
Conclusion
To learn more about this and other ETFs, find products that match your investment goals, and read articles on the latest developments in the ETF investment universe, visit Zacks ETF Center.
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First Trust NASDAQ Clean Edge Smart Grid Infrastructure (GRID) ETF: ETF Research Reports
Eaton Corporation, PLC (ETN) : Free Stock Analysis Report
iShares Global Infrastructure ETF (IGF): ETF Research Reports
ETF Global X US Infrastructure Development (PAVE): ETF Research Reports