Weird ETFs To Buy #2 — The First Trust US IPO Index
Like their spin-off brethren, initial public offerings (IPOs) have historically provided great returns for early investors. The problem is that a few IPOs skew the results — most end up being duds. While investors can try and guess which company is going to be the next Google (GOOG), the First Trust US IPO Index (FPX) makes the job easy.
FPX spreads its $479 million in assets among 100 different IPOs. The ETF’s underlying index — the IPOX-100 U.S. Index — seeks to measure the average performance of U.S. IPOs during the first 1000 trading days. Index constituents are selected based on quantitative initial screens. Currently, top holdings include biotech AbbVie (ABBV) and Facebook (FB).
The only drawback is that FPX misses out on some of the first-day “pop” associated with IPO investing. The ETF only buys stocks after they’ve been trading for at least a week.
Despite this, FPX has been a pretty impressive performer. The ETF has managed to produce an 12% annual return since its inception in 2006. And expenses only run 0.6%.