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Should You Invest in the Vanguard Financials ETF (VFH)?

Sector ETF report for VFH

By
This story originally appeared on Zacks

Launched on 01/26/2004, the Vanguard Financials ETF (VFH) is a passively managed exchange traded fund designed to provide a broad exposure to the Financials - Broad segment of the equity market.

- Zacks

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

Sector ETFs also provide investors access to a broad group of companies in particular sectors that offer low risk and diversified exposure. Financials - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 2, placing it in top 13%.

Index Details

The fund is sponsored by Vanguard. It has amassed assets over $11.73 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.

Costs

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain 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 1.85%.

Sector Exposure and Top Holdings

ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many 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, Jpmorgan Chase & Co. (JPM) accounts for about 9.69% of total assets, followed by Berkshire Hathaway Inc. (BRK.B) and Bank Of America Corp. (BAC).

Performance and Risk

The ETF has gained about 0% and was up about 36.55% so far this year and in the past one year (as of 01/04/2022), respectively. VFH has traded between $71.74 and $100.95 during this last 52-week period.

The ETF has a beta of 1.18 and standard deviation of 30.24% for the trailing three-year period, making it a medium risk choice in the space. With about 398 holdings, it effectively diversifies company-specific risk.

Alternatives

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 Global Financials ETF (IXG) tracks S&P Global 1200 Financials Sector Index and the Financial Select Sector SPDR ETF (XLF) tracks Financial Select Sector Index. IShares Global Financials ETF has $2.81 billion in assets, Financial Select Sector SPDR ETF has $45.26 billion. IXG has an expense ratio of 0.43% and XLF charges 0.12%.

Bottom Line

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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Vanguard Financials ETF (VFH): ETF Research Reports

 

Bank of America Corporation (BAC): Free Stock Analysis Report

 

JPMorgan Chase & Co. (JPM): Free Stock Analysis Report

 

Berkshire Hathaway Inc. (BRK.B): Free Stock Analysis Report

 

Financial Select Sector SPDR ETF (XLF): ETF Research Reports

 

iShares Global Financials ETF (IXG): ETF Research Reports

 

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