State Street's XLF or First Trust's FTXO: Which Financial ETF Is the Better Long-Term Buy?
Key Points
State Street Financial Select Sector SPDR ETF features a significantly lower expense ratio.
First Trust Nasdaq Bank ETF provides concentrated exposure to 42 bank stocks while State Street Financial Select Sector SPDR ETF holds 76 diverse financial companies.
State Street Financial Select Sector SPDR ETF has demonstrated lower volatility over the last five years compared to the First Trust fund.
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Investors choosing between State Street Financial Select Sector SPDR ETF (NYSEMKT:XLF) and First Trust Nasdaq Bank ETF (NASDAQ:FTXO) must weigh the cost efficiency of a broad-market financial fund against a concentrated, high-conviction play on the U.S. banking industry.
Both funds offer targeted exposure to financial markets, but they differ significantly in scope. While the First Trust fund hones in on the US banking sub-sector using a smart-beta approach, the State Street fund tracks the entire financial segment of the S&P 500, offering a more diversified and liquid entry point.
Snapshot (cost & size)
| Metric | FTXO | XLF |
|---|---|---|
| Issuer | First Trust | SPDR |
| Share price | $42.05 (as of 2026-07-20) | $56.04 (as of 2026-07-20) |
| Expense ratio | 0.60% | 0.08% |
| 1-yr return (as of July 20, 2026) | 24.00% | 8.30% |
| Dividend yield | 1.70% | 1.40% |
| Beta | 0.89 | 0.85 |
| AUM | $306.1 million | $55.6 billion |
Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.
State Street Financial Select Sector SPDR ETF is significantly more affordable than First Trust Nasdaq Bank ETF. The First Trust fund provides a slightly higher trailing-12-month payout, though both funds focus on income-producing financial stocks with assets under management (AUM) levels that vary by over $55.0 billion.
Performance & risk comparison
| Metric | FTXO | XLF |
|---|---|---|
| Max drawdown (5 yr) | (46.60%) | (25.80%) |
| Growth of $1,000 over 5 years (total return) | $1,586 | $1,670 |
What's inside
State Street Financial Select Sector SPDR ETF holds 76 positions, representing a broad swath of the financial market. Its largest positions include JPMorgan Chase (NYSE:JPM) at 11.50%, Berkshire Hathaway (NYSE:BRKB) at 11.33%, and Visa (NYSE:V) at 7.49%. The portfolio consists primarily of financial services at 98% and technology at 2%. The fund was launched in 1998. It has paid $0.81 per share over the trailing 12 months, which on its recent ~$56.04 share price works out to a 1.40% yield.
First Trust Nasdaq Bank ETF tracks the Nasdaq US Smart Banks Index, maintaining a more concentrated focus on 42 bank stocks. Its top holdings include Bank of America (NYSE:BAC) at 8.46%, Citigroup (NYSE:C) at 8.08%, and JPMorgan Chase (NYSE:JPM) at 7.82%. The fund allocates 100.00% of its assets to the financial services sector. The fund was launched in 2016. It has paid $0.73 per share over the trailing 12 months, which on its recent ~$42.05 share price works out to a 1.70% yield.
For more guidance on ETF investing, check out the full guide at this link.
What this means for investors
XLF is one of the most widely held sector ETFs ever created, offering exposure to the full breadth of American finance. You get banks, insurers, payment networks, asset managers, and capital markets firms, all at a very low cost. With Berkshire Hathaway, JPMorgan, and Visa anchoring the portfolio, the fund has a stability that comes from owning businesses across multiple corners of the financial world.
FTXO bets entirely on one corner of the financial world: banking. And its stock-picking methodology pulls the portfolio toward the dominant players in U.S. banking. That narrow focus has rewarded investors with stronger returns than XLF over the past year as megabanks benefited from deregulation optimism and rising deal activity. The trade-off is a fee nearly eight times higher and no exposure to the payment networks and insurers that often lead the broader sector in different environments.
For most long-term investors, XLF's lower cost, broader diversification, and massive institutional following make it the more practical core holding. FTXO appeals to investors making a deliberate, high-conviction bet that America's largest banks will continue to outpace the broader financial sector, and who are prepared to pay a premium for that targeted exposure.
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JPMorgan Chase is an advertising partner of Motley Fool Money. Citigroup is an advertising partner of Motley Fool Money. Bank of America is an advertising partner of Motley Fool Money. Sara Appino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway, JPMorgan Chase, and Visa. The Motley Fool has a disclosure policy.
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