First Trust Mid Cap Growth AlphaDEX Fund (FNY) seeks to track the NASDAQ AlphaDEX Mid Cap Growth Index, which selects mid-cap growth stocks using a quantitative screening process that ranks companies on growth factors like sales growth, one-year sales growth momentum, and price momentum to identify the most attractive growth opportunities.
How It Works
FNY uses First Trust's proprietary AlphaDEX methodology to rank eligible mid-cap stocks on multiple growth criteria, then selects the top-scoring companies for inclusion. The fund employs equal weighting rather than market-cap weighting to avoid concentration in the largest companies. Holdings are reconstituted and rebalanced quarterly to maintain exposure to the highest-ranking growth stocks. The strategy combines quantitative factor screening with systematic rebalancing to capture mid-cap growth momentum while managing single-stock concentration risk.
Key Features
- Equal-weighted approach prevents over-concentration in largest mid-cap names, providing more balanced exposure across selected growth companies
- Quantitative AlphaDEX screening process systematically identifies mid-cap stocks with strongest growth momentum and sales acceleration
- Quarterly rebalancing captures changing growth dynamics and maintains exposure to companies with improving fundamental growth metrics
Risks
- This ETF can lose value significantly during growth stock selloffs when investors rotate to value stocks, potentially declining 40-50% in severe market corrections
- Equal weighting creates higher turnover and transaction costs compared to cap-weighted alternatives, potentially dragging on long-term returns during stable markets
- Mid-cap stocks exhibit higher volatility than large-caps, with potential for 20-30% swings during normal market cycles due to lower liquidity
Who Should Own This
Best suited for aggressive growth investors with 3-7 year time horizons seeking mid-cap exposure as a satellite holding (10-20% of equity allocation). High risk tolerance required due to growth stock volatility and mid-cap concentration. Appropriate for investors wanting systematic factor-based growth selection rather than broad mid-cap market exposure.