The Vanguard Financials ETF (VFH) was launched on 01/26/2004, and is a passively managed exchange traded fund designed to offer broad exposure to the Financials – Broad segment of the equity market.
Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.
Sector ETFs are also funds of convenience, offering many ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Financials – Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 10, placing it in bottom 38%.
The fund is sponsored by Vanguard. It has amassed assets over $9.04 billion, making it one of the largest ETFs attempting to match the performance of the Financials – Broad segment of the equity market. VFH seeks to match the performance of the MSCI US Investable Market Financials 25/50 Index before fees and expenses.
The MSCI US Investable Market Index (IMI)/Financials 25/50 measures the investment return of stocks in the financial sector.
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.
Annual operating expenses for this ETF are 0.10%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 2.23%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Financials sector–about 100% of the portfolio.
Looking at individual holdings, Berkshire Hathaway Inc. (BRK.B) accounts for about 8.67% of total assets, followed by Jpmorgan Chase & Co. (JPM) and Bank Of America Corp. (BAC).
The top 10 holdings account for about 22.88% of total assets under management.
Performance and Risk
The ETF has added roughly 3.34% and is down about -11.02% so far this year and in the past one year (as of 01/19/2023), respectively. VFH has traded between $74.44 and $100.39 during this last 52-week period.
The ETF has a beta of 1.10 and standard deviation of 32.33% for the trailing three-year period, making it a medium risk choice in the space. With about 378 holdings, it effectively diversifies company-specific risk.
Vanguard Financials ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, VFH is an excellent option for investors seeking exposure to the Financials ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.
IShares U.S. Financials ETF (IYF) tracks Dow Jones U.S. Financials Index and the Financial Select Sector SPDR ETF (XLF) tracks Financial Select Sector Index. IShares U.S. Financials ETF has $2.05 billion in assets, Financial Select Sector SPDR ETF has $32.73 billion. IYF has an expense ratio of 0.39% and XLF charges 0.10%.
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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