Is a Traditional ETF Like FTXO Better for Profiting With Financials, or Is the Leveraged Fund UYG the Better Bet?

Investors choosing between First Trust Nasdaq Bank ETF (NASDAQ:FTXO) and ProShares Ultra Financials (NYSEMKT:UYG) must weigh the relative stability of a concentrated bank index against the high-octane, leveraged exposure of a broader financials fund.

Both exchange-traded funds focus on the financial sector but take vastly different paths. The First Trust fund targets traditional banking institutions for long-term growth, while the ProShares fund seeks to double the daily performance of its underlying index, introducing a specific leverage reset quirk that impacts its risk profile.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield asd of the close of trading on July 22.

The First Trust fund is the more affordable option with a 0.60% expense ratio compared to the 0.94% charged by the ProShares fund. While the ProShares fund currently shows a significantly higher trailing payout, its leveraged structure influences these distributions.

Performance & risk comparison

What's inside

The ProShares Ultra Financials portfolio includes 76 holdings, in Financial Services at 98% and Technology at 2%. Its largest positions include JPMorgan Chase & Co (NYSE:JPM) at 7.2%, Berkshire Hathaway Inc. (NYSE:BRKB) at 7.6%, and ProShares Genius Money Market ETF (NYSEMKT:IQMM) at 5.4%, essentially a cash position. It was launched in 2007. ProShares Ultra Financials has paid $0.85 per share over the trailing 12 months, plus a short-term gains distribution of $9.83, which gets taxed as ordinary income to the shareholder The fund is characterized by a daily leverage reset quirk that makes it more sensitive to short-term price movements.

The First Trust Nasdaq Bank ETF portfolio holds 50 companies focused on Financial Services. Its largest positions include Citigroup Inc. (NYSE:C) at 9%, Bank of America Corporation (NYSE:BAC) at 8.1%, and JPMorgan Chase & Co (NYSE:JPM) at 7.7%. It was launched in 2016. First Trust Nasdaq Bank ETF has paid $0.73 per share over the trailing 12 months, which on its recent ~$42.51 share price works out to a 1.70% yield. Unlike its counterpart, this fund tracks the Nasdaq U.S. Smart Banks Index without utilizing daily leverage to achieve its results.

Which fund is the better buy?

These both give investors access to financial stocks in convenient ETF form, but they are very different ways to invest.

FTXO, the First Trust ETF, is a pretty vanilla ETF, holding a basket of stocks in the financial sector. That’s not to dismiss the fund at all. Investors will find a ETF that is nicely diverse across market caps (it is 41% in large caps, 33% in mid caps, and 26% in small caps), and is about 59% in its top 10 holdings, which is decently weighted toward the rest of the portfolio. Over the nearly 10 years since its inception, it has produced annualized annual returns of 10.4%, with 8.7% in the past five years and 27.9% over the most recent three years.

The ProShares performance shows the volatility that can come with a leveraged ETF. Year-to-date 2026, it has lost 6.4% (FTXO is up 10.3%), while showing 3-, 5-, and 10-year annualized returns of 28.5%, 10.7%, and 17.1%, respectively. Yet, leveraged ETFs bring additional risk because they rebalance daily and use derivatives and futures to achieve leverage, adding costs.

As my colleague James Brumley noted earlier this year, although intended to move twice as much as its underlying index on a daily basis, because UYG utilizes futures and options to achieve its goal of leveraged returns, this type of ETF often underperforms, particularly over longer periods with both upward and downward moves. That makes their net long-term risk disproportionally greater than their long-term potential upside.

In short, leveraged ETFs like the ProShares UYG are not for the faint of heart and are not really suitable for long-term investing. FTXO is the better choice for those looking to get exposure to financials.

For more guidance on ETF investing, check out the full guide at this link.

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. Brendan Coffey has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and JPMorgan Chase. The Motley Fool has a disclosure policy.