First Trust Exchange-Traded Fund VI First Trust SMID Growth Strength ETF (FSGS) seeks to track small- and mid-cap U.S. companies exhibiting strong growth characteristics. The fund focuses on SMID-cap stocks that demonstrate superior earnings growth, revenue expansion, and fundamental strength metrics compared to broader market peers.
How It Works
FSGS employs a rules-based selection process that screens small- and mid-cap companies for specific growth criteria including earnings per share growth, revenue growth rates, and return on equity metrics. The fund uses equal weighting methodology rather than market-cap weighting to prevent larger positions from dominating performance. Holdings are rebalanced quarterly to maintain equal allocations and ensure continued adherence to growth quality standards across approximately 100-150 selected companies.
Key Features
- Equal-weighted approach provides balanced exposure to growth opportunities without large-cap bias typical in market-cap weighted funds
- Focuses specifically on SMID-cap growth segment often overlooked by large-cap growth strategies, capturing emerging company potential
- Quantitative screening process identifies companies with measurable growth metrics rather than subjective growth story assessments
Risks
- This ETF can lose value significantly during growth stock selloffs, as small- and mid-cap growth companies typically decline 40-60% in bear markets
- Equal weighting creates concentration risk if multiple holdings face sector-specific challenges, amplifying losses compared to diversified market-cap approaches
- Small- and mid-cap stocks experience higher volatility than large-caps, with potential for 20-30% swings during normal market conditions
Who Should Own This
Best suited as a satellite holding (10-20% of equity allocation) for aggressive growth investors with 7+ year time horizons and high risk tolerance. Appropriate for investors seeking to complement large-cap core holdings with small- and mid-cap growth exposure. Requires patience for multi-year performance cycles typical of smaller growth companies.