Should You Invest in the iShares U.S. Financial Services ETF (IYG)?
The iShares U.S. Financial Services ETF (IYG) was launched on 06/12/2000, and is a passively managed exchange traded fund designed to offer broad exposure to the Financials - Broad segment of the equity market.
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 Blackrock. It has amassed assets over $1.42 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
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Annual operating expenses for this ETF are 0.40%, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.29%.
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 100% of the portfolio.
Looking at individual holdings, Berkshire Hathaway Inc Class B (BRK.B) accounts for about 15.85% of total assets, followed by Jpmorgan Chase & Co (JPM) and Visa Inc Class A (V).
The top 10 holdings account for about 62.42% of total assets under management.
Performance and Risk
The ETF has gained about 19.82% and it's up approximately 40.42% so far this year and in the past one year (as of 10/08/2024), respectively. IYG has traded between $48.34 and $71.76 during this last 52-week period.
The ETF has a beta of 1.16 and standard deviation of 20.70% for the trailing three-year period, making it a high risk choice in the space. With about 107 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 $10.09 billion in assets, Financial Select Sector SPDR ETF has $41.91 billion. VFH has an expense ratio of 0.10% and XLF charges 0.09%.
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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iShares U.S. Financial Services ETF (IYG): 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
Vanguard Financials ETF (VFH): ETF Research Reports