Boston, Massachusetts – With the rise of interest rates and the potential for a market shift, investors are taking a closer look at the Fidelity Dividend ETF for Rising Rates (FDRR). This ETF focuses on large and mid-cap companies with a dividend growth profile and aims to benefit from increasing interest rates.

Despite showing positive returns in 2024, outperforming the market, FDRR has historically lagged behind other dividend growth ETFs. Concerns arise about how the fund will fare in an environment where interest rates may fall, prompting some investors to steer clear of FDRR.

The FDRR ETF tracks the “Fidelity Dividend Index for Rising Rates,” which selects from the top 1,000 U.S. companies by market capitalization. While the fund has the flexibility to include international equities, its connection to rising rates is only a small factor in its overall methodology.

With 114 holdings in its current portfolio, FDRR includes major market leaders like Microsoft, Apple, and NVIDIA. However, despite its promise of a dividend growth strategy, FDRR has consistently underperformed its peers since its inception in 2016.

While FDRR’s expense ratio is slightly higher than some competitors, the fund’s lackluster performance raises questions about its ability to deliver excess returns. As market conditions evolve, investors are advised to consider alternatives that may be better equipped to navigate changing market cycles.

Looking ahead, uncertainties surrounding interest rates and inflation may pose challenges for FDRR. As the market landscape shifts, investors should carefully evaluate the fund’s ability to generate returns and withstand potential market volatility.

With a plethora of ETF options available, investors are urged to research thoroughly and consider alternatives to FDRR that may offer more promising outcomes in varying market conditions.