Making its debut on 09/20/2016, smart beta exchange traded fund First Trust NASDAQ Bank ETF (FTXO Quick QuoteFTXO - Free Report) provides investors broad exposure to the Financials ETFs category of the market.

What Are Smart Beta ETFs?

Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.

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.

These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.

The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.

Fund Sponsor & Index

The fund is managed by First Trust Advisors. FTXO has been able to amass assets over $248.88 million, making 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

For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.

Annual operating expenses for this ETF are 0.60%, making it on par with most peer products in the space.

It's 12-month trailing dividend yield comes in at 1.93%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. 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.

Taking into account individual holdings, Citigroup Inc. (C) accounts for about 8.17% of the fund's total assets, followed by Jpmorgan Chase & Co. (JPM) and U.s. Bancorp (USB).

The top 10 holdings account for about 58.34% of total assets under management.

Performance and Risk

The ETF has added about 6.7% and was up about 16.71% so far this year and in the past one year (as of 10/28/2026), respectively. FTXO has traded between $33.72 and $43.87 during this last 52-week period.

The ETF has a beta of 0.92 and standard deviation of 23.61% 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 $1.46 billion in assets, Invesco KBW Bank ETF has $6.59 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.