3 Financial ETFs to Buy for a Diversified Portfolio

The financial services sector is rapidly expanding due to increasing demand for insurance and loans, globalization and urbanization driving investments, global economic growth and the integration of fintech-supported digital payment solutions.

Given this positive view, the addition of financial ETFs such as the Financial Select Sector SPDR Fund (XLF), Vanguard Financial Index Fund ETF (VFH), And iShares US Financial ETF (IYF) can be a smart choice for a diversified portfolio.

The US financial services industry is driven by: Increased demand for insurance and loans among consumers. Globalization and urbanization lead to increased demand for end-user investments. The sector is also affected by global economic growth, resulting in increased demand for financial services.

Additionally, the global banking and financial services market is expected to grow rapidly. CAGR of 7.9% from 2023 to 2030. Additionally, market players are significantly integrating with fintech-enabled banks to offer modern digital payment solutions, including mobile wallets and contactless payment, contributing to the growth of the segment.

With that in mind, let’s look at the basics of the top three Financial Stock ETFsstarting from the third one.

ETF #3: iShares US Financial ETF (IYF)

IYF, BlackRock, Inc. It is an exchange-traded fund launched by . BlackRock Fund Advisors manage this. It invests in stocks of companies operating in the financial sectors. It invests in growth and value stocks of companies across various market capitalizations.

Their largest holding is Berkshire Hathaway Inc. with $3.15 Billion in AUM. Class B (BRK.B) JPMorgan Chase & Co. with a weight of 12.6%. (JPM) 9.3% and Bank of America Corp (BAC) at 4.4% weight.

ETFs expense ratio It is 0.39% compared to the category average of 1.52%. Last month, IYF’s fund inflow was 17.55 million dollars. The fund pays an annual dividend of $1.38, which represents a yield of 1.34% at the current price level.

IYF increased by 10% in the last three months and closed the last trading session at $103.47. Its five-year beta is 1.05. The fund’s NAV as of September 27, 2024 was $103.55.

IYFs POWR Ratings This reflects the hopeful outlook. The ETF’s overall rating of A equates to a Strong Buy in our proprietary ratings system. POWR Ratings are calculated by considering 118 different factors, with each factor optimally weighted.

The fund has an A rating for Trading and Buy and Hold. IYF ranks 4th among 41 countries Financial Stock ETFs ETF. Click here To access all IYF ratings.

ETF #2: Vanguard Financials Index Fund ETF Shares (VFH)

VFH is an exchange-traded fund that tracks the MSCI US IMI 25/50 Financial Index, launched and managed by Vanguard Equity Index Group. It is passively managed, holding U.S. financial stocks at all market caps and using a market cap selection and weighting scheme to capture the broader financial market.

With AUM of $10.08 billion, VFH’s largest holding is JPM, which has an 8.8% weighting in the fund. This was followed by BRK.B and Mastercard Incorporated (8.6%).degree) at 5.5% weight. The fund has a total of 404 assets.

VFH’s expense ratio is 0.10%, which is below the category average of 1.52%. The fund’s NAV is $109.58 as of September 27, 2024. The ETF’s net inflow was $99.86 million in the last three months.

VFH pays an annual dividend of $1.95, which yields 1.78% at the current price level. The fund’s dividend payments have increased at a CAGR of 5.6% over the past five years. Additionally, VFH increased its dividends for three consecutive years.

VFH is up 9.8% in the last three months and 18.6% in the last nine months, closing at $109.29 in the last trading session.

VFH’s POWR Ratings reflect solid expectations. The overall A rating equates to Strong Buy in our proprietary rating system.

VFH has an A rating in Buy and Hold and Trading. It ranks 2nd among 41 ETFs in the same group. Get all VFH ratings Here.

ETF #1: Financial Select Sector SPDR Fund (XLF)

XLF effectively provides access to the US financial segment. Its emissions-heavy, S&P 500-only portfolio concentrates on large banks and avoids small caps. It invests in companies in industries such as diversified financial services, insurance, commercial banks and capital markets. The fund tracks the Financial Select Sector Index.

The fund’s AUM is $41.57 billion. Its top holdings include BRK.B with a 13.32% weighting, followed by JPM and Visa Inc with a 9.61% weighting. (V) at 7.24%. XLF has a total of 73 holdings.

The fund’s expense ratio is 0.09%, which is below the category average of 1.52%. XLF fund inflow reached $649.22 million in the last six months.

XLF pays an annual dividend of $0.66, which represents a 1.47% yield based on the current share price. Dividend payments have increased at a CAGR of 3.35% over the past five years.

XLF increased by 7.2% in the last six months and 35.1% in the past year, closing the last trading session at $44.86. The fund’s NAV as of September 27, 2024 is $45.92.

XLF’s POWR Ratings reflect its strong outlook. The ETF has an overall rating of A, meaning Strong Buy in our proprietary rating system.

XLF has an A rating for Buy and Hold and Trade. The fund topped the list of 41 ETFs in the same group.

To access all POWR Ratings for XLF, Click here.

What to Do Next?

Steve Reitmeister, an investment expert of 43 years, revealed his 2024 market outlook, as well as his trading plan and 11 best predictions for the coming year.

2024 Stock Market Outlook >

---

IYF shares were trading down $0.12 (-0.12%) at $103.35 per share on Monday afternoon. Since the beginning of the year, IYF has increased by 22.22%, compared to a 21.23% increase in the benchmark S&P 500 index in the same period.

About the Author: Nidhi Agarwal

Nidhi is passionate about capital markets and asset management, which led her to pursue a career as an investment analyst. He has a bachelor’s degree in finance and marketing and is pursuing the CFA program. His fundamental approach to analyzing stocks helps investors identify the best investment opportunities. More…

More Resources for Stocks in This Article