Is First Trust NASDAQ Bank ETF (FTXO) a Strong ETF Right Now?

Designed to provide broad exposure to the Financials ETFs category of the market, the First Trust NASDAQ Bank ETF (FTXO) is a smart beta exchange traded fund launched on 09/20/2016.

What Are Smart Beta ETFs?

The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.

A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.

However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.

Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.

While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.

Fund Sponsor & Index

The fund is managed by First Trust Advisors, and has been able to amass over $232.92 million, which makes it one of the average sized ETFs in the Financials ETFs. This particular fund, before fees and expenses, seeks to match the performance of the Nasdaq US Smart Banks Index.

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

Cost & Other Expenses

For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.

With on par with most peer products in the space, this ETF has annual operating expenses of 0.60%.

It has a 12-month trailing dividend yield of 2.24%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, 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, Jpmorgan Chase & Co. (JPM) accounts for about 8.33% of total assets, followed by Wells Fargo & Company (WFC) and Bank Of America Corporation (BAC).

The top 10 holdings account for about 58.76% of total assets under management.

Performance and Risk

Year-to-date, the First Trust NASDAQ Bank ETF has lost about -0.12% so far, and it's up approximately 19.40% over the last 12 months (as of 05/21/2025). FTXO has traded between $25.40 and $35.28 in this past 52-week period.

The fund has a beta of 0.91 and standard deviation of 28.05% for the trailing three-year period. With about 51 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust NASDAQ Bank ETF is an excellent option for investors seeking to outperform the Financials ETFs segment of the market. There are other ETFs in the space which investors could consider as well.

SPDR S&P Bank ETF (KBE) tracks S&P Banks Select Industry Index and the Invesco KBW Bank ETF (KBWB) tracks KBW Nasdaq Bank index. SPDR S&P Bank ETF has $1.49 billion in assets, Invesco KBW Bank ETF has $3.76 billion. KBE has an expense ratio of 0.35% and KBWB charges 0.35%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Financials ETFs.

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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This article originally published on Zacks Investment Research (zacks.com).

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