Should You Invest in the iShares U.S. Financial Services ETF (IYG)?
Launched on 06/12/2000, the iShares U.S. Financial Services ETF (IYG) is a passively managed exchange traded fund designed to provide a broad exposure to the Financials - Broad segment of the equity market.
While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.
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 15, placing it in bottom 6%.
Index Details
The fund is sponsored by Blackrock. It has amassed assets over $1.24 billion, making it one of the larger ETFs attempting to match the performance of the Financials - Broad segment of the equity market. IYG seeks to match the performance of the Dow Jones U.S. Financial Services Index before fees and expenses.
The Dow Jones U.S. Financial Services Index measures the performance of the financial services sector of the U.S. equity market.
Costs
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Annual operating expenses for this ETF are 0.39%, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.95%.
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, Jpmorgan Chase & Co (JPM) accounts for about 11.52% of total assets, followed by Visa Inc Class A (V) and Mastercard Inc Class A (MA).
The top 10 holdings account for about 58.68% of total assets under management.
Performance and Risk
Year-to-date, the iShares U.S. Financial Services ETF has added roughly 7.47% so far, and it's up approximately 7.64% over the last 12 months (as of 07/24/2023). IYG has traded between $140.77 and $176.24 in this past 52-week period.
The ETF has a beta of 1.16 and standard deviation of 23.16% for the trailing three-year period, making it a high risk choice in the space. With about 106 holdings, it effectively diversifies company-specific risk.
Alternatives
IShares U.S. Financial Services ETF sports a Zacks ETF Rank of 4 (Sell), which is based on expected asset class return, expense ratio, and momentum, among other factors. IYG, then, is not a suitable option for investors seeking exposure to the Financials ETFs segment of the market. Instead, there are better ETFs in the space to consider.
Vanguard Financials ETF (VFH) tracks MSCI US Investable Market Financials 25/50 Index and the Financial Select Sector SPDR ETF (XLF) tracks Financial Select Sector Index. Vanguard Financials ETF has $8.35 billion in assets, Financial Select Sector SPDR ETF has $34.95 billion. VFH has an expense ratio of 0.10% and XLF charges 0.10%.
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.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
iShares U.S. Financial Services ETF (IYG): ETF Research Reports
JPMorgan Chase & Co. (JPM) : Free Stock Analysis Report
Mastercard Incorporated (MA) : Free Stock Analysis Report
Visa Inc. (V) : Free Stock Analysis Report
Financial Select Sector SPDR ETF (XLF): ETF Research Reports
Vanguard Financials ETF (VFH): ETF Research Reports
