Should You Invest In The First Trust Water ETF (FIW)?

Launched on 05/08/2007, the First Trust Water ETF (FIW) is a passively managed exchange traded fund designed to provide a broad exposure to the Industrials - Water segment of the U.S. equity market.

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

Sector ETFs are also funds of convenience, offering many ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Industrials - Water is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 2, placing it in top 13%.

Index Details

The fund is sponsored by First Trust Advisors. It has amassed assets over $303.55 M, making it one of the average sized ETFs attempting to match the performance of the Industrials - Water segment of the U.S. equity market. FIW seeks to match the performance of the ISE Clean Edge Water Index before fees and expenses.

The ISE Clean Edge Water Index is a modified market capitalization-weighted index comprised of exchange-listed companies that derive a substantial portion of their revenues from the potable and wastewater industry.

Costs

When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.

Annual operating expenses for this ETF are 0.57%, making it one of the cheaper products in the space.

It has a 12-month trailing dividend yield of 0.66%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Industrials sector--about 56.90% of the portfolio. Utilities and Healthcare round out the top three.

Looking at individual holdings, Idexx Laboratories, Inc. (IDXX) accounts for about 4.49% of total assets, followed by Ecolab Inc. (NYSE:ECL) and Danaher Corporation (NYSE:DHR).

The top 10 holdings account for about 39.42% of total assets under management.

Performance and Risk

The ETF return is roughly 0.66% and it's up approximately 13.95% so far this year and in the past one year (as of 06/15/2018), respectively. FIW has traded between $41.93 and $49.96 during this last 52-week period.

The ETF has a beta of 1.11 and standard deviation of 15.44% for the trailing three-year period, making it a medium risk choice in the space. With about 37 holdings, it has more concentrated exposure than peers.

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.