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

The First Trust NASDAQ Bank ETF (FTXO) made its debut on 09/20/2016, and is a smart beta exchange traded fund that provides broad exposure to the Financials ETFs category of the market.

What Are Smart Beta ETFs?

For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.

Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.

But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.

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.

This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.

Fund Sponsor & Index

Managed by First Trust Advisors, FTXO has amassed assets over $289.59 million, making it one of the average sized ETFs in the Financials ETFs. 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.

Cost & Other Expenses

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

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 1.75%.

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.

Representing 100% of the portfolio, the fund has heaviest allocation to the Financials sector.

Taking into account individual holdings, Citigroup Inc. (C) accounts for about 9.11% of the fund's total assets, followed by Wells Fargo & Company (WFC) and Bank Of America Corporation (BAC).

The top 10 holdings account for about 61.47% of total assets under management.

Performance and Risk

So far this year, FTXO has gained about 9.32%, and is up about 21.88% in the last one year (as of 02/10/2026). During this past 52-week period, the fund has traded between $25.92 and $41.45.

The ETF has a beta of 0.96 and standard deviation of 26.43% for the trailing three-year period. With about 50 holdings, it has more concentrated exposure than peers .

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 $1.59 billion in assets, Invesco KBW Bank ETF has $6.5 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

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

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