Making its debut on 09/20/2016, smart beta exchange traded fund First Trust NASDAQ Bank ETF (FTXO) provides investors broad exposure to the Financials ETFs category of the market.
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.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
FTXO is managed by First Trust Advisors, and this fund has amassed over $265.76 million, which makes it one of the average sized ETFs in the Financials ETFs. Before fees and expenses, FTXO 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
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.60%.
FTXO's 12-month trailing dividend yield is 1.86%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 100% of the portfolio, the fund has heaviest allocation to the Financials sector.
Taking into account individual holdings, Wells Fargo & Company (WFC) accounts for about 8.54% of the fund's total assets, followed by Citigroup Inc. (C) and Bank Of America Corporation (BAC).
Its top 10 holdings account for approximately 59.64% of FTXO's total assets under management.
Performance and Risk
Year-to-date, the First Trust NASDAQ Bank ETF has gained about 17.32% so far, and was up about 9.19% over the last 12 months (as of 12/09/2025). FTXO has traded between $25.92 $36.82 in this past 52-week period.
The fund has a beta of 0.96 and standard deviation of 26.46% for the trailing three-year period. With about 51 holdings, it effectively diversifies company-specific risk .
Alternatives
First Trust NASDAQ Bank ETF is a reasonable option for investors seeking to outperform the Financials ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
State Street 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. State Street SPDR S&P Bank ETF has $1.38 billion in assets, Invesco KBW Bank ETF has $5.81 billion. KBE has an expense ratio of 0.35% and KBWB changes 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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First Trust NASDAQ Bank ETF (FTXO): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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