Should You Invest in the First Trust NASDAQ Clean Edge Smart Grid Infrastructure ETF (GRID)?

Looking for broad exposure to the Utilities - 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.

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.

Additionally, sector ETFs offer convenient ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Utilities - Infrastructure is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 12, placing it in bottom 25%.

Index Details

The fund is sponsored by First Trust Advisors. It has amassed assets over $553.59 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.

Costs

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

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 0.82%.

Sector Exposure and Top Holdings

ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

Looking at individual holdings, Eaton Corporation Plc (NYSE:ETN) accounts for about 8.31% of total assets, followed by Schneider Electric (PA:SCHN) Se (SU.FP) and Johnson Controls International Plc (NYSE:JCI).

The top 10 holdings account for about 60.51% of total assets under management.

Performance and Risk

The ETF has added about 16.15% and it's up approximately 42.55% so far this year and in the past one year (as of 10/06/2021), respectively. GRID has traded between $63.82 and $100.03 during this last 52-week period.

The ETF has a beta of 1.19 and standard deviation of 27.67% 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.

Alternatives

First Trust NASDAQ Clean Edge Smart Grid Infrastructure ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, GRID is an outstanding 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.

IShares Global Infrastructure ETF (IGF) tracks S&P Global Infrastructure Index and the Global X U.S. Infrastructure Development ETF (PAVE) tracks INDXX U.S. Infrastructure Development Index. IShares Global Infrastructure ETF has $3.06 billion in assets, Global X U.S. Infrastructure Development ETF has $4.41 billion. IGF has an expense ratio of 0.43% and PAVE charges 0.47%.

Bottom Line

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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