Should You Invest in the Vanguard Financials ETF (VFH)?
Designed to provide broad exposure to the Financials - Broad segment of the equity market, the Vanguard Financials ETF (VFH) is a passively managed exchange traded fund launched on 01/26/2004.
Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.
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 7, placing it in top 44%.
Index Details
The fund is sponsored by Vanguard. It has amassed assets over $9.41 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
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are 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 2.04%.
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, Berkshire Hathaway Inc (BRK/B) accounts for about 8.16% of total assets, followed by Jpmorgan Chase & Co (JPM) and Visa Inc (V).
Performance and Risk
The ETF has added about 1.91% so far this year and was up about 8.86% in the last one year (as of 01/29/2024). In that past 52-week period, it has traded between $74.65 and $94.02.
The ETF has a beta of 1.10 and standard deviation of 20.45% for the trailing three-year period, making it a medium risk choice in the space. With about 397 holdings, it effectively diversifies company-specific risk.
Alternatives
Vanguard Financials ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, VFH 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.
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 $2.29 billion in assets, Financial Select Sector SPDR ETF has $36.11 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
Financial Select Sector SPDR ETF (XLF): ETF Research Reports
iShares U.S. Financials ETF (IYF): ETF Research Reports
