You already know that you can hold your money in a bank — but did you know that you can invest in your bank as well?
Major banking institutions like JPMorgan, Barclays and Wells Fargo are publicly traded companies that allow investors like you to own a portion of the company by purchasing stock. You can invest in a handful of the world’s biggest banks with a single purchase.
Benzinga offers a look at some of the top ETFs if you want to put your money into the banking industry.
Quick Look at the Best Bank ETFs:
Bank ETFs Biggest Gainers and Losers
Which bank ETFs are moving today? Let’s take a look at which bank ETFs are gaining and losing value.
Premarket Bank ETFs
Trading early in the morning? These bank ETFs are moving in the premarket.
Aftermarket Bank ETFs
These bank ETFs are moving in the aftermarket hours.
Why Invest in Bank ETFs?
With so many investment options, why should you invest in the best bank ETFs? Let’s take a look at 3 of the biggest benefits that come with investing in a bank ETF.
- Bank ETFs pay higher-than-average dividends. Dividends are small percentages of a company’s profits paid out to investors. Bank ETFs typically pay out more in dividends than other industries. For example, the largest bank ETF — the SPDR S&P Bank ETF — currently has a dividend yield of 3.80%. Want to invest in an asset that will pay consistent dividends, bank ETFs are a great choice.
- Bank ETFs represent a relatively stable market segment. The banking industry tends to remain stable even as the market fluctuates. Banks earn their money from a wide range of investments, ranging from personal loans to interest on mortgage investments. Compared to sectors like REITs and oil or other investment classes like penny stocks, you’ll see less movement in the banking sector during recessions.
- Bank ETFs give you an inherent level of diversity. Why buy a bank ETF over a share of your bank of choice? When you purchase an ETF, you’re receiving a tiny share of many different bank stocks. This means that if 1 bank goes under or has a poor quarter, you won’t see major losses because your money is spread over dozens (and sometimes hundreds) of different investments.
3 Bank ETFs by AUM
Ready to begin investing in a bank ETF? Here are some of the top bank ETFs organized by total assets under management (AUM).
1. SPDR S&P Bank ETF (KBE).
The SPDR S&P Bank ETF is made up of a wide range of assets from regional banks. Some of the ETF’s largest holdings are in New York Community Bancorp Inc., First Republic Bank, Voya Financial Inc. and Northern Trust Corp
KBE currently has $950.60 million in assets under management as of April 1, 2020. The fund’s investment in regional and thrift banks might not make it the best choice for investors looking to hedge their investments during a recession, but it can make an excellent entry into the banking industry for those looking to invest with less capital.
2. Invesco KBW Bank ETF (KBWB).
The Invesco KBW Bank ETF is a concentrated ETF made up of stocks from 25 of the largest banking institutions in the United States. Some of the fund’s largest holdings are in JPMorgan Chase & Co, Bank of America Corp, U.S. Bancorp and Citigroup Inc.
KBWB currently has $325.59 million in assets under management as of April 1, 2020. About a 3rd of the fund’s assets are devoted to its 3 largest holdings, which means that you might experience larger price movements than ETFs like KBE, which divides its assets among a very wide range of banks.
3. AdvisorShares Ranger Equity Bear ETF (HDGE).
The AdvisorShares Ranger Equity Bear ETF is a different type of fund. Instead of purchasing assets to hold in the long term, HDGE is an actively managed fund that aims to identify candidates in the banking sector for short-term sales.
The fund’s major holdings can change frequently but are currently held mostly in cash, AdvisorShares Sage Core Reserves ETF and Credit Acceptance Corp. HDGE can be an excellent addition to your portfolio during a market downturn.
The drawback of this fund is its high expense ratio — at 3.12%, HDGE is about 10 times more expensive to hold than KBE and KBWB. As of April 1, 2020, HDGE currently holds $136.36 million in assets under management.
Best Online Brokers for Bank ETFs
To invest in any ETF, you’ll need to open an account with an online broker. Let’s take a look at a few of our favorite online brokerage firms.
1. You Invest by J.P. Morgan
If you’re already a customer with Chase Bank, Chase You Invest by J.P. Morgan is a no-brainer. You can easily research, trade and manage your investments from your mobile device. You Invest provides online tools to search for investments, track companies and rollover your assets.
Only U.S. clients are able to open a You Invest account but it takes, on average, just a day to open and you’re able to apply fully online. Equipped with portfolio reports and pie charts, the mobile app is simple and user-friendly. The app is available for both iOS and Android devices.
With Chase You Invest you’ll have access to roughly 5,000 stock exchanges. There are plenty of research and educational tools provided on the app. Overall, we recommend the Chase You Invest platform for stock trading because it’s easy to open and fund an account. It’s also reliable thanks to its strong parent company, J.P. Morgan.
TradeStation is an advanced trading platform that allows you to buy and sell stocks and ETFs with $0 commissions and a $0 account minimum. TradeStation’s trading platform is comprehensive, offering a wide range of charting and drawing tools and indicators.
If you’re new to trading, you’ll love TradeStation’s wide range of educational resources. From a native news feed that updates you on the morning’s market happenings to its YouTube channel that teaches you how to take advantage of all the platform’s tools and offerings, there’s something for everyone. With an impressive platform, selection of tools and real-time news and market information, TradeStation is our top choice if you’re interested in getting started trading.
If you’re a new trader overwhelmed by expert-level platforms like TradeStation, you’ll love Firstrade’s focus on simplicity. Firstrade is a highly-streamlined platform, combining full access to the stock, option and fund market with an easy platform that anyone can master in as little as an afternoon. You can even trade from the persistent Quick Bar tool that follows you around the web even after you close out of your brokerage platform web page.
Like TradeStation, Firstrade also offers a number of educational tools you can use to enhance your trading. However, like its brokerage platform, Firstrade focuses its education tools on beginners. From easy-to-read beginner tutorials for trading to Morningstar reports that intermediate traders will love, Firstrade’s educational offerings are impressive.
4. TD Ameritrade
TD Ameritrade is one of the largest online brokers in the United States — its platform combines simplicity with strength. TD Ameritrade’s largest claim to fame is its thinkorswim platform, a world-class trading platform that offers detailed reports on assets, over 300 charting tools and indicators and easy onboarding. Though the platform can be a bit overwhelming for beginners, higher-level traders will drool over the sheer power offered by thinkorswim.
TD Ameritrade also offers a range of educational and market news tools. From Level II research to Morningstar reports, every user will find something to improve their trades. TD Ameritrade also offers one of the market’s strongest mobile trading platforms — there’s even a specific trading app available for tablets.
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Frequently Asked Questions
What are bank ETFs?
Bank ETFs are shares in banks.
Is investing bank ETFs risky?
Investing in bank ETFs is not considered risky.
Which bank ETFs should I invest in?
You can find Benzinga’s recommended bank ETFs on the list above.