There's a lot of uncertainty as to how 2022 will play out. But there's at least one thing that looks to be a certainty: interest rates will rise. And it's likely they won't just rise once or twice but several times. That can be problematic for many stocks, particularly for those companies that carry a lot of debt and where higher interest rates will translate into greater interest expenses.
An exchange-traded fund (ETF) that investors should consider to offset some of these risks is the First Trust Nasdaq Bank ETF (NASDAQ:FTXO). The fund is made up entirely of financial services stocks, including big banks that can benefit from rising interest rates. Some of the ETF's top holdings include JPMorgan Chase & Co. (NYSE:JPM), Citigroup (NYSE:C), and Wells Fargo (NYSE:WFC).
In the past year, the ETF has risen more than 34% when including its dividend yield of 1.7%, outperforming the S&P 500 and its total returns of 22%. Its net expense ratio of 0.60% is modest and in line with other ETFs. The First Trust Nasdaq Bank ETF rebalances on a quarterly basis and includes 28 holdings, some of which account for more than 8% of its total weight.
Although you won't be able to diversify your portfolio with just this one bank-focused fund, it can potentially be a valuable investment in a year which could be full of rate hikes. For conservative or income-oriented investors, this is an ETF that might make for an attractive option today and that can be a solid investment to hang on to for the long haul.
