Back to top

Image: Bigstock

Should You Invest in the First Trust NASDAQ ABA Community Bank Index Fund (QABA)?

Read MoreHide Full Article

The First Trust NASDAQ ABA Community Bank Index Fund (QABA - Free Report) was launched on 06/29/2009, and is a passively managed exchange traded fund designed to offer broad exposure to the Financials - Community Banks segment of the equity market.

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.

Sector ETFs are also funds of convenience, offering many ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Financials - Community Banks is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 11, placing it in bottom 31%.

Index Details

The fund is sponsored by First Trust Advisors. It has amassed assets over $227.24 M, making it one of the average sized ETFs attempting to match the performance of the Financials - Community Banks segment of the equity market. QABA seeks to match the performance of the NASDAQ OMX ABA Community Bank Index before fees and expenses.

The NASDAQ OMX ABA Community Bank Index is a market capitalization-weighted index. The Index includes a subset of banks and thrifts or their holding companies listed on NASDAQ.

Costs

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 1.71%.

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 99.70% of the portfolio.

Looking at individual holdings, East West Bancorp, Inc. (EWBC - Free Report) accounts for about 3.04% of total assets, followed by Commerce Bancshares, Inc. (CBSH - Free Report) and Bok Financial Corporation (BOKF - Free Report) .

The top 10 holdings account for about 21.30% of total assets under management.

Performance and Risk

So far this year, QABA has added roughly 11.05%, and is down about -10.24% in the last one year (as of 01/31/2019). During this past 52-week period, the fund has traded between $41.05 and $58.34.

The ETF has a beta of 1.05 and standard deviation of 20.07% for the trailing three-year period, making it a high risk choice in the space. With about 161 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust NASDAQ ABA Community Bank Index Fund carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, QABA is a good option for those seeking exposure to the Financials ETFs area of the market. Investors might also want to consider some other ETF options in the space.

Published in