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Should You Invest in the First Trust Financials AlphaDEX ETF (FXO)?

If you're interested in broad exposure to the Financials - Broad segment of the equity market, look no further than the First Trust Financials AlphaDEX ETF (FXO), a passively managed exchange traded fund launched on May 8, 2007.

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also 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. Financials - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 4, placing it in top 25%.

Index Details

The fund is sponsored by First Trust Advisors. It has amassed assets over $1.13 billion, making it one of the larger ETFs attempting to match the performance of the Financials - Broad segment of the equity market. FXO seeks to match the performance of the StrataQuant Financials Index before fees and expenses.

The StrataQuant Financials Index is a modified equal-dollar weighted index designed by the AMEX to objectively identify and select stocks from the Russell 1000 Index that may generate positive alpha relative to traditional passive style indices through the use of the AlphaDEX screening methodology.

Costs

Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.

Annual operating expenses for this ETF are 0.6%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 1.98%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Financials sector -- about 98.5% of the portfolio.

Looking at individual holdings, Lincoln National Corporation (LNC) accounts for about 1.78% of total assets, followed by Factset Research Systems Inc. (FDS) and Interactive Brokers Group, Inc. (class A) (IBKR).

The top 10 holdings account for about 17.27% of total assets under management.

Performance and Risk

Year-to-date, the First Trust Financials AlphaDEX ETF has gained about 10.86% so far, and is up roughly 17.22% over the last 12 months (as of 08/18/2026). FXO has traded between $54.46 and $66.93 in this past 52-week period.

The ETF has a beta of 0.93 and standard deviation of 18.42% for the trailing three-year period, making it a medium risk choice in the space. With about 105 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust Financials AlphaDEX ETF sports a Zacks ETF Rank of 4 (Sell), which is based on expected asset class return, expense ratio, and momentum, among other factors. FXO, then, is not a great choice for investors seeking exposure to the Financials ETFs segment of the market. Instead, there are better ETFs in the space to consider.

Vanguard Financials Index Fund ETF Shares (VFH) tracks MSCI US Investable Market Financials 25/50 Index and the State Street Financial Select Sector SPDR ETF (XLF) tracks Financial Select Sector Index. Vanguard Financials Index Fund ETF Shares has $13.83 billion in assets, State Street Financial Select Sector SPDR ETF has $57.98 billion. VFH has an expense ratio of 0.09%, and XLF charges 0.08%.

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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First Trust Financials AlphaDEX ETF (FXO): ETF Research Reports

This article originally published on Zacks Investment Research (zacks.com).

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