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

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

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are 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 5, placing it in top 31%.

Index Details

The fund is sponsored by First Trust Advisors. It has amassed assets over $266.53 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 2.19%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. 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, Wells Fargo & Company (WFC - Free Report) accounts for about 8.01% of total assets, followed by Zions Bancorporation (ZION - Free Report) and Keycorp (KEY - Free Report) .

The top 10 holdings account for about 59.96% of total assets under management.

Performance and Risk

Year-to-date, the First Trust NASDAQ Bank ETF has lost about -17.71% so far, and is down about -13.69% over the last 12 months (as of 05/19/2022). FTXO has traded between $27.39 and $37 in this past 52-week period.

The ETF has a beta of 1.20 and standard deviation of 39.95% 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 excellent 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 - Free Report) tracks KBW Nasdaq Bank index and the SPDR S&P Bank ETF (KBE - Free Report) tracks S&P Banks Select Industry Index. Invesco KBW Bank ETF has $2.14 billion in assets, SPDR S&P Bank ETF has $2.39 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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