The Best ETF for Bank Exposure

Investors looking for pure play bank exposure instead of diversified financial services exchange traded funds have an array of options to consider. A smart beta idea in this genre is the First Trust Nasdaq Bank ETF (Nasdaq: FTXO).

Capital levels at major U.S. banks are viewed as solid. Additionally, the Trump Administration’s tax reform effort is seen as a potential catalyst for the financial services sector, but it remains to be seen if that effort will come to life.

FTXO may have had the benefit of good timing when it came to market, but there is no denying that the fund has proven popular with investors. The First Trust fund does not turn two years old in September, but it already has over $1.3 billion in assets under management.

What Makes FTXO Tick

This smart beta bank ETF tracks the Nasdaq US Smart Banks Index. That benchmark is a significant departure from old school bank indexes.

“Nasdaq selects the 30 most liquid eligible bank securities from the NASDAQ US Benchmark Index and then ranks those securities based on three factors: volatility – trailing 12-month price fluctuation, value – cash flow to price and growth – the 3-, 6-, 9-, and 12-month average price appreciation,” according to First Trust.

Deregulation could also help the financial sector improve their margins. President Donald Trump has shown its eagerness in cutting back the red tape and remove some of the post-financial crisis regulations that has stifled the industry. FTXO’s 30 holdings have a median market value of nearly $16.1 billion.