Is First Trust Financials AlphaDEX ETF (FXO) a Strong ETF Right Now?

The First Trust Financials AlphaDEX ETF (FXO) made its debut on 05/08/2007, and is a smart beta exchange traded fund that provides broad exposure to the Financials ETFs category of the market.

What Are Smart Beta ETFs?

For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.

Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.

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.

Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.

This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.

Fund Sponsor & Index

The fund is managed by First Trust Advisors, and has been able to amass over $1.1 billion, which makes it one of the larger ETFs in the Financials ETFs. Before fees and expenses, this particular fund seeks to match the performance of the StrataQuant Financials Index.

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.

Cost & Other Expenses

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

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 2.02%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. 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.

Taking into account individual holdings, Marketaxess Holdings Inc. (MKTX) accounts for about 2.23% of the fund's total assets, followed by Lincoln National Corporation (LNC) and Factset Research Systems Inc. (FDS).

The top 10 holdings account for about 18.17% of total assets under management.

Performance and Risk

Year-to-date, the First Trust Financials AlphaDEX ETF return is roughly 8.49% so far, and is up roughly 11.6% over the last 12 months (as of 09/16/2026). FXO has traded between $54.46 $66.98 in this past 52-week period.

The fund has a beta of 0.93 and standard deviation of 18.34% for the trailing three-year period, which makes FXO a medium risk choice in this particular space. With about 105 holdings, it effectively diversifies company-specific risk .

Alternatives

First Trust Financials AlphaDEX 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.

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 $13.3 billion in assets, State Street Financial Select Sector SPDR ETF has $54.5 billion. VFH has an expense ratio of 0.09% and XLF changes 0.08%.

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

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

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