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Should You Invest in the iShares U.S. Financial Services ETF (IYG)?

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Designed to provide broad exposure to the Financials - Broad segment of the equity market, the iShares U.S. Financial Services ETF (IYG) is a passively managed exchange traded fund launched on 06/12/2000.

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.

Additionally, sector ETFs offer convenient 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 1, placing it in top 6%.

Index Details

The fund is sponsored by Blackrock. It has amassed assets over $2.77 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

When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.

Annual operating expenses for this ETF are 0.41%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 1.21%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. 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 84% of the portfolio, followed by Information Technology.

Looking at individual holdings, Jpmorgan Chase & Co (JPM) accounts for about 11.49% of total assets, followed by Visa Inc Class A (V) and Bank Of America Corp (BAC).

The top 10 holdings account for about 54.67% of total assets under management.

Performance and Risk

Year-to-date, the iShares U.S. Financial Services ETF has added about 2.13% so far, and is up roughly 36.72% over the last 12 months (as of 01/05/2022). IYG has traded between $145.36 and $203.56 in this past 52-week period.

The ETF has a beta of 1.25 and standard deviation of 30.81% for the trailing three-year period, making it a high risk choice in the space. With about 108 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares U.S. Financial Services ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, IYG is a sufficient option for those seeking exposure to the Financials ETFs area of the market. Investors might also want to consider some other ETF options in the space.

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 $12 billion in assets, Financial Select Sector SPDR ETF has $46.48 billion. VFH has an expense ratio of 0.10% 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.


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
 
Bank of America Corporation (BAC) : Free Stock Analysis Report
 
JPMorgan Chase & Co. (JPM) : 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
 
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Zacks Investment Research