Should You Invest in the Vanguard Financials ETF (VFH)?
Looking for broad exposure to the Financials - Broad segment of the equity market? You should consider the Vanguard Financials ETF (VFH), a passively managed exchange traded fund launched on 01/26/2004.
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 Vanguard. It has amassed assets over $8.43 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
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 0.10%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 2.27%.
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, Jpmorgan Chase & Co. (JPM) accounts for about 8.91% of total assets, followed by Berkshire Hathaway Inc. (BRK.B) and Bank Of America Corp. (BAC).
Performance and Risk
Year-to-date, the Vanguard Financials ETF has added about 5.66% so far, and it's up approximately 10.13% over the last 12 months (as of 07/25/2023). VFH has traded between $74.44 and $90.64 in this past 52-week period.
The ETF has a beta of 1.09 and standard deviation of 22.03% for the trailing three-year period, making it a medium risk choice in the space. With about 376 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 good 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 $1.94 billion in assets, Financial Select Sector SPDR ETF has $35.30 billion. IYF has an expense ratio of 0.39% 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
Bank of America Corporation (BAC) : Free Stock Analysis Report
JPMorgan Chase & Co. (JPM) : 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
