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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.
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.
Sector ETFs are also funds of convenience, offering many 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 3, placing it in top 19%.
Index Details
The fund is sponsored by Vanguard. It has amassed assets over $8.83 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
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 0.10%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 2.28%.
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 8.57% of total assets, followed by Jpmorgan Chase & Co. (JPM) and Bank Of America Corp. (BAC).
The top 10 holdings account for about 40.12% of total assets under management.
Performance and Risk
The ETF has lost about -15.02% so far this year and is down about -9.97% in the last one year (as of 09/16/2022). In that past 52-week period, it has traded between $75.35 and $101.75.
The ETF has a beta of 1.11 and standard deviation of 31.54% for the trailing three-year period, making it a medium risk choice in the space. With about 384 holdings, it effectively diversifies company-specific risk.