Should you consider adding First Trust Dow Jones Select MicroCap ETF (FDM) to your investment watchlist?

Overview of First Trust Dow Jones Select MicroCap ETF (FDM)

If you're seeking comprehensive access to the US small-cap blend market, the First Trust Dow Jones Select MicroCap ETF (FDM) is worth considering. This passively managed exchange-traded fund has been available since September 27, 2005.

Managed by First Trust Advisors, FDM currently manages assets totaling more than $231.68 million, positioning it as a mid-sized ETF within the small-cap blend category.

The Appeal of Small Cap Blend Investments

Small-cap companies, typically valued at under $2 billion, often offer greater growth potential than their larger counterparts, though they also carry increased risk.

Blend ETFs, which include both growth and value stocks, provide a balance of characteristics from both investment styles.

Fee Structure

Expense ratios play a crucial role in ETF returns. Over time, funds with lower fees can outperform pricier alternatives, assuming all other factors are equal.

FDM has an annual expense ratio of 0.6%, placing it among the higher-cost options in its category.

The ETF offers a trailing 12-month dividend yield of 1.33%.

Portfolio Composition and Leading Holdings

Before investing in any ETF, it's important to review its holdings, even though these funds offer diversification that helps reduce the impact of individual stock volatility. Most ETFs, including FDM, provide daily transparency of their portfolios.

FDM allocates the largest portion of its assets—approximately 40.1%—to the Financials sector. Industrials and Consumer Discretionary sectors are also significant components.

Among individual holdings, Dauch Corporation (DCH) represents about 2.65% of the fund's assets, with Stoke Therapeutics, Inc. (STOK) and Tetra Technologies, Inc. (TTI) following closely behind.

The top ten holdings collectively make up around 16.55% of the fund's total assets.

Performance and Risk Profile

FDM aims to replicate the performance of the Dow Jones Select Microcap Index, which tracks liquid microcap stocks with solid fundamentals.

Year-to-date, FDM has gained approximately 7.92%, and over the past year (as of 03/03/2026), it has risen about 27.22%. During the last 52 weeks, its share price has ranged from $55.48 to $87.33.

With a three-year beta of 1.01 and a standard deviation of 21.34%, FDM is considered a moderate-risk investment. Its portfolio of roughly 151 holdings helps spread out company-specific risks.

Other ETF Options to Consider

FDM holds a Zacks ETF Rank of 3 (Hold), which reflects factors such as expected returns, fees, and momentum. It is a suitable choice for those interested in the small-cap blend segment, but investors may also want to explore additional options.

• The iShares Russell 2000 ETF (IWM) tracks a similar index and manages $74.64 billion in assets, with an expense ratio of 0.19%.
• The iShares Core S&P Small-Cap ETF (IJR) has $96.28 billion in assets and a lower expense ratio of 0.06%.

Conclusion

Passively managed ETFs like FDM are favored by both institutional and individual investors for their cost efficiency, transparency, flexibility, and tax advantages, making them a strong option for long-term portfolios.