Should You Invest in the First Trust NASDAQ Bank ETF (FTXO)?

Designed to provide broad exposure to the Financials - Banking segment of the equity market, the First Trust NASDAQ Bank ETF (FTXO) is a passively managed exchange traded fund launched on 09/20/2016.

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. Financials - Banking is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 3, placing it in top 19%.

Index Details

The fund is sponsored by First Trust Advisors. It has amassed assets over $231.80 million, making it one of the average sized ETFs attempting to match the performance of the Financials - Banking segment of the equity market. FTXO seeks to match the performance of the Nasdaq US Smart Banks Index before fees and expenses.

The Nasdaq US Smart Banks Index is a modified factor weighted index, designed to provide exposure to US companies within the banking industry.

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 0.60%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 2.28%.

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 Financials sector--about 100% of the portfolio.

Looking at individual holdings, Popular, Inc. (BPOP) accounts for about 8.50% of total assets, followed by M&t Bank Corporation (MTB) and Wells Fargo & Company (WFC).

The top 10 holdings account for about 60.03% of total assets under management.

Performance and Risk

So far this year, FTXO has lost about -13.63%, and is down about -6.31% in the last one year (as of 09/20/2022). During this past 52-week period, the fund has traded between $25.42 and $37.

The ETF has a beta of 1.18 and standard deviation of 40.31% for the trailing three-year period. With about 31 holdings, it has more concentrated exposure than peers.

Alternatives

First Trust NASDAQ Bank ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, FTXO is an outstanding option for investors seeking exposure to the Financials ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

Invesco KBW Bank ETF (KBWB) tracks KBW Nasdaq Bank index and the SPDR S&P Bank ETF (KBE) tracks S&P Banks Select Industry Index. Invesco KBW Bank ETF has $1.99 billion in assets, SPDR S&P Bank ETF has $2.11 billion. KBWB has an expense ratio of 0.35% and KBE charges 0.35%.

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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.