Should You Invest in the Vanguard Financials ETF (VFH)?
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.
An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they 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 - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 11, placing it in bottom 31%.
Index Details
The fund is sponsored by Vanguard. It has amassed assets over $8.56 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
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 0.10%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 2.39%.
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, Berkshire Hathaway Inc. (BRK.B) accounts for about 8.21% of total assets, followed by Jpmorgan Chase & Co. (JPM) and Visa Inc. (V).
Performance and Risk
So far this year, VFH has added roughly 0.24%, and was up about 9.43% in the last one year (as of 09/26/2023). During this past 52-week period, the fund has traded between $74.44 and $90.64.
The ETF has a beta of 1.09 and standard deviation of 21.68% for the trailing three-year period, making it a medium risk choice in the space. With about 394 holdings, it effectively diversifies company-specific risk.
Alternatives
Vanguard Financials 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, VFH 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.
IShares U.S. Financials ETF (IYF) tracks Dow Jones U.S. Financials Index and the Financial Select Sector SPDR ETF (XLF) tracks Financial Select Sector Index. IShares U.S. Financials ETF has $1.82 billion in assets, Financial Select Sector SPDR ETF has $31.17 billion. IYF has an expense ratio of 0.40% 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.
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Vanguard Financials ETF (VFH): ETF Research Reports
JPMorgan Chase & Co. (JPM) : Free Stock Analysis Report
Visa Inc. (V) : Free Stock Analysis Report
Berkshire Hathaway Inc. (BRK.B) : Free Stock Analysis Report
Financial Select Sector SPDR ETF (XLF): ETF Research Reports
iShares U.S. Financials ETF (IYF): ETF Research Reports
