Should You Invest in the Invesco KBW Bank ETF (KBWB)?
Looking for broad exposure to the Financials - Banking segment of the equity market? You should consider the Invesco KBW Bank ETF (KBWB), a passively managed exchange traded fund launched on 11/01/2011.
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 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 - Banking is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 16, placing it in bottom 0%.
Index Details
The fund is sponsored by Invesco. It has amassed assets over $1.34 billion, making it one of the larger ETFs attempting to match the performance of the Financials - Banking segment of the equity market. KBWB seeks to match the performance of the KBW Nasdaq Bank index before fees and expenses.
The KBW Nasdaq Bank index is a modified-market capitalization-weighted index that seeks to reflect the performance of companies that do business as banks or thrifts that are publicly-traded in the US.
Costs
Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.
Annual operating expenses for this ETF are 0.35%, making it one of the cheaper products in the space.
It has a 12-month trailing dividend yield of 3.78%.
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, Citigroup Inc (C) accounts for about 9.59% of total assets, followed by Jpmorgan Chase & Co (JPM) and Bank Of America Corp (BAC).
The top 10 holdings account for about 66.43% of total assets under management.
Performance and Risk
So far this year, KBWB has lost about -18.25%, and is down about -18.60% in the last one year (as of 07/11/2023). During this past 52-week period, the fund has traded between $37 and $59.40.
The ETF has a beta of 1.18 and standard deviation of 30.66% for the trailing three-year period, making it a high risk choice in the space. With about 24 holdings, it has more concentrated exposure than peers.
Alternatives
Invesco KBW Bank ETF sports a Zacks ETF Rank of 4 (Sell), which is based on expected asset class return, expense ratio, and momentum, among other factors. KBWB, then, is not a great choice for investors seeking exposure to the Financials ETFs segment of the market. However, there are better ETFs in the space to consider.
First Trust NASDAQ Bank ETF (FTXO) tracks Nasdaq US Smart Banks Index and the SPDR S&P Bank ETF (KBE) tracks S&P Banks Select Industry Index. First Trust NASDAQ Bank ETF has $134.44 million in assets, SPDR S&P Bank ETF has $1.37 billion. FTXO has an expense ratio of 0.60% and KBE charges 0.35%.
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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Invesco KBW Bank ETF (KBWB): ETF Research Reports
Bank of America Corporation (BAC) : Free Stock Analysis Report
JPMorgan Chase & Co. (JPM) : Free Stock Analysis Report
Citigroup Inc. (C) : Free Stock Analysis Report
SPDR S&P Bank ETF (KBE): ETF Research Reports
First Trust NASDAQ Bank ETF (FTXO): ETF Research Reports
