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Should You Invest in the First Trust NASDAQ Oil & Gas ETF (FTXN)?

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If you're interested in broad exposure to the Energy - Broad segment of the equity market, look no further than the First Trust NASDAQ Oil & Gas ETF (FTXN - Free Report) , a passively managed exchange traded fund launched on 09/20/2016.

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.

Sector ETFs also provide investors access to a broad group of companies in particular sectors that offer low risk and diversified exposure. Energy - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 2, placing it in top 13%.

Index Details

The fund is sponsored by First Trust Advisors. It has amassed assets over $1.05 billion, making it one of the larger ETFs attempting to match the performance of the Energy - Broad segment of the equity market. FTXN seeks to match the performance of the Nasdaq US Smart Oil & Gas Index before fees and expenses.

The Nasdaq US Smart Oil & Gas Index is a modified factor weighted index, designed to provide exposure to US companies within the oil and gas industry.

Costs

When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.

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 1.77%.

Sector Exposure and Top Holdings

ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Energy sector--about 100% of the portfolio.

Looking at individual holdings, Chevron Corporation (CVX - Free Report) accounts for about 7.30% of total assets, followed by Marathon Oil Corporation (MRO - Free Report) and Conocophillips (COP - Free Report) .

The top 10 holdings account for about 52.32% of total assets under management.

Performance and Risk

The ETF has added about 23.89% so far this year and is up roughly 32.83% in the last one year (as of 06/28/2022). In that past 52-week period, it has traded between $14.94 and $31.70.

The ETF has a beta of 1.43 and standard deviation of 43.28% for the trailing three-year period. With about 51 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust NASDAQ Oil & Gas ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, FTXN is a great option for investors seeking exposure to the Energy ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

Vanguard Energy ETF (VDE - Free Report) tracks MSCI US Investable Market Energy 25/50 Index and the Energy Select Sector SPDR ETF (XLE - Free Report) tracks Energy Select Sector Index. Vanguard Energy ETF has $7.57 billion in assets, Energy Select Sector SPDR ETF has $35.14 billion. VDE has an expense ratio of 0.10% and XLE charges 0.10%.

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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