Should You Invest in the iShares U.S. Broker-Dealers & Securities Exchanges ETF (IAI)?
Launched on 05/01/2006, the iShares U.S. Broker-Dealers & Securities Exchanges ETF (IAI) is a passively managed exchange traded fund designed to provide a broad exposure to the Financials - Brokers/ Capital markets segment of the U.S. 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.
Investor-friendly, sector ETFs provide many options to gain low risk and diversified exposure to a broad group of companies in particular sectors. Financials - Brokers/ Capital markets is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 12, placing it in bottom 25%.
Index Details
The fund is sponsored by Blackrock. It has amassed assets over $234.62 M, making it the largest ETF attempting to match the performance of the Financials - Brokers/ Capital markets segment of the U.S. equity market. IAI seeks to match the performance of the Dow Jones U.S. Select Investment Services Index before fees and expenses.
The Dow Jones U.S. Select Investment Services Index measures the performance of the investment services sector of the U.S. equity market.
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 0.44%, making it the most expensive product in the space.
It has a 12-month trailing dividend yield of 1.20%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, 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, Goldman Sachs Group Inc (GS) accounts for about 10.27% of total assets, followed by Morgan Stanley (MS) and Charles Schwab Corp (SCHW).
The top 10 holdings account for about 65.80% of total assets under management.
Performance and Risk
The ETF has added about 5.66% so far this year and is up about 36.57% in the last one year (as of 04/17/2018). In that past 52-week period, it has traded between $49.06 and $70.28.
The ETF has a beta of 1.21 and standard deviation of 19.58% for the trailing three-year period, making it a high risk choice in the space. With about 29 holdings, it has more concentrated exposure than peers.
Alternatives
IShares U.S. Broker-Dealers & Securities Exchanges ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, IAI 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.
SPDR S&P Capital Markets ETF (KCE) tracks S&P Capital Markets Select Industry Index. The fund has $163.86 M in assets. KCE has an expense ratio of 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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Morgan Stanley (MS) : Free Stock Analysis Report
The Charles Schwab Corporation (SCHW) : Free Stock Analysis Report
The Goldman Sachs Group, Inc. (GS) : Free Stock Analysis Report
ISHARS-US BR-D (IAI): ETF Research Reports
SPDR-KBW CAP MK (KCE): ETF Research Reports
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