What Is the FXO ETF? A Complete Guide to Returns, Expense Ratio, Holdings, and Alternative ETFs
A quantitative strategy for investing in US financial stocks. This ETF uses the AlphaDEX model to identify financial companies with strong growth and value characteristics.
SubscribeWhat Is This ETF?
The fund tracks the StrataQuant Financials Index and holds stocks with strong fundamentals selected from within the financial sector. It uses a sophisticated quantitative model to capture market inefficiencies, aiming to outperform typical index-tracking products.
It suits investors who want concentrated exposure to the financial sector while seeking excess returns through more active stock selection than a simple index investment offers.
It is a passively managed (index-tracking) ETF launched by First Trust in 2007.
How Does It Invest?
| Item | Details |
|---|---|
| Tracked Index | StrataQuant Financials Index |
| Management Style | Passive (Smart Beta) |
| Rebalancing Frequency | Quarterly |
| Dividend Frequency | Quarterly |
| Total Expense Ratio | 0.60% |
The model evaluates financial sector companies on a combination of growth factors, such as price volatility and revenue growth, and value factors, such as price relative to book value. It selects top-ranked stocks and assigns different weights by group, which eases the concentration in large caps and provides broad exposure that extends to mid caps.
- Refined selection of financial stocks based on the AlphaDEX quantitative model
- A strategy designed to overcome the limitations of market-cap weighting
Size and Costs
Assets under management (AUM) stand at $1.1B, and the Expense Ratio is 0.60% per year.
Because of its elaborate stock selection process, its fees tend to be higher than those of typical sector ETFs, but it seeks to differentiate its performance through active factor exposure.
Performance and Trends
1-Year Price Performance
Dividend & Yield
52-Week Price RangeVolatility has appeared across the sector amid shifting interest rate conditions and financial regulatory policy, but financial companies with solid balance sheets have held up well on the back of improving earnings.
Smart money looking for alternatives to traditional financial stock index funds has been flowing in, and interest is growing among investors who prefer selective, fundamentals-based investing.
Strengths and Weaknesses
It is an efficient vehicle for uncovering high-quality financial stocks and pursuing strong returns, but investors should be mindful of risks unique to the financial sector and the potential for forecasting errors in the quantitative model.
💪 Key Strengths
⚠️ Points of Caution
Alternative ETFs and Related Products
While VFH and IYF, shown in the table, invest across the financial sector using market-cap weighting, FXO focuses on selection through a quantitative model. Compared with Nasdaq-based indexes such as ONEQ, it is distinguished by its specialized exposure to the financial sector. For a more direct large-cap alternative, you can consider XLF, and if you want exposure more focused on bank stocks, KBE and KRE are also worth reviewing.
Peer Comparison ETFs| Ticker | Name | Price | Change | AUM | Total Expense Ratio | Dividend Yield | 1Y |
|---|---|---|---|---|---|---|---|
 VFH | Vanguard Financials ETF | $138.36 | +1.5% | $13.3B | 0.09% | 1.7% | +9.1% |
 ONEQ | Fidelity Nasdaq Composite Index ETF | $103.18 | -1.4% | $10.9B | 0.21% | 0.5% | +9.6% |
 VIS | Vanguard Industrials ETF | $326.04 | +1.2% | $7.7B | 0.09% | 0.94% | +8.4% |
 FV | First Trust Dorsey Wright Focus 5 ETF | $75.86 | -0.3% | $4.0B | 0.89% | 0.35% | +22.6% |
 IYF | iShares U.S. Financials ETF | $132.22 | +1.2% | $3.7B | 0.37% | 1.47% | +8.7% |
Top Holdings| Ticker | Name | Weight | Price | Change | Market Cap | P/E | Dividend Yield |
|---|---|---|---|---|---|---|---|
 MKTX | MarketAxess Holdings Inc | 0.02% | $164.92 | +0.1% | $5.8B | 20.2 | 1.89% |
 LNC | Lincoln National Corp | 0.02% | $41.37 | +1.8% | $7.9B | 3.6 | 4.36% |
 FDS | Factset Research Systems Inc | 0.02% | $320.04 | +2.4% | $11.3B | 22.0 | 1.49% |
| TRV | Travelers Companies Inc | 0.02% | $398.27 | +1.1% | $81.6B | 10.4 | 1.22% |
| ALL | Allstate Corp | 0.02% | $255.92 | +2.3% | $64.7B | 5.1 | 1.69% |
 FAF | First American Financial Corp | 0.03% | $63.72 | +0.3% | $6.5B | 9.0 | 3.64% |
 SEIC | SEI Investments Co | 0.02% | $104.73 | +1.5% | $12.4B | 18.2 | 1.02% |
 CBC | Central Bancompany Inc | 0.02% | $35.86 | +1.7% | $8.6B | 19.3 | 1.34% |
| HIG | Hartford Insurance Group Inc | 0.02% | $132.06 | +1.6% | $35.3B | 8.0 | 1.86% |
Investor Checkpoints
FXO is a specialized product that seeks excess returns in the financial sector through a quantitative model, so before making an investment decision, use the key checklist below to confirm that it matches your investment profile.
| Checkpoint | What to Confirm | Current Status |
|---|---|---|
| 📊 Factor Selection | Understand the principles of stock selection based on growth and value metrics | Continuously applied |
| 🏛️ Financial Risk | Whether you can tolerate sector volatility from interest rate and regulatory changes | Needs review |
| 💸 Fee Level | Check whether costs are reasonable compared with similar financial sector ETFs | Somewhat high |
| 📅 Rebalancing | Assess the impact of quarterly portfolio turnover | Ongoing |
The financial sector reacts very sensitively to macroeconomic conditions. Investors should also note that performance can become unstable during abrupt market shifts that the quantitative algorithm fails to anticipate.
It is a suitable tool for aggressive investors who want to invest in high-quality US financial companies through a sophisticated strategy. It is a core asset recommended for those who want to manage the financial weighting in their portfolio efficiently.
SubscribeDisclaimer: This content is for informational purposes only and does not constitute investment advice. All investment responsibility lies with the investor.
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