Uncertain times motivate many people to seek the familiar and the powerful in society. Investors are no different. The big names they know and trust provide a solid foundation to hold onto until the wild ride is over. Major players in the finance sector can provide that stability to your portfolio. The top finance ETFs allow you to own a piece of many big financial companies at the same time.
Benzinga looked at the top finance ETFs and below, you will find a list of some of the best.
Quick Look at the Best Finance ETFs:
ETFs Biggest Gainers and Losers
The same factors that influence most securities also affect finance ETFs. The biggest gainers and losers lists can give you an indication of how individual finance ETFs react to unemployment figures, inflation and interest rates.
|CHGX||AXS Change Finance ESG ETF||$29.67||0.74%||$10.4K||Buy/Sell|
|IYF||iShares U.S. Financial ETF||$75.30||0.72%||$145.3K||Buy/Sell|
|XLF||SPDR Select Sector Fund - Financial||$33.45||0.64%||$38.5M||Buy/Sell|
|PTMN||Portman Ridge Finance||$19.19||-0.13%||$22.7K||Buy/Sell|
|VFH||Vanguard Financials ETF||$80.88||0.09%||$506.4K||Buy/Sell|
Premarket Finance ETFs
Due to low trade volume, premarket activity may (or may not) affect finance ETF prices during regular trade sessions. An ETF that appears strong in the premarket may fizzle before the opening bell. If you are a new or casual investor, premarket trading can be especially risky. The wider gap between the bid-ask price can cause you to lose money through slippage.
Aftermarket Finance ETFs
The same factors that influence the premarket exist in the aftermarket. The difference is trade volume is as low as penny stock trading. The risk of losing money through slippage is greater. Except in unusual circumstances, the aftermarket is better left to the pros.
Why Invest in Finance ETFs?
- It's easy: Finance ETFs track the holding of indexes. There is no need for you to pick each stock in the index’s portfolio. ETF investing provides you with a diversified portfolio of holdings with 1 transaction. Your main job is choosing the right finance ETF for you.
- Its cheap cost: Since you are making 1 transaction, you save on the commission cost of buying each holding individually. Many online brokers don’t charge commissions for ETF trades. So, your only cost is the expense ratio (ER). The average ER is 0.44% — or $4.40 annually per $1,000 investment.
- Low fraud potential: The financial institutions that sponsor finance ETFs must publish a daily list of the fund’s assets. This requirement doesn’t apply to mutual funds. With ETFs, you have the advantage of knowing exactly what’s in your fund’s portfolio.
3 Finance ETF(s) by AUM
Finance ETFs give investors the option of targeting specific strategic positions such as consumer finance, insurance and mortgage finance. It depends on the index each ETF tracks.
Since you are looking for solvency and stability in an investment, a fund’s assets under management (AUM) is a proven indicator of that. Benzinga uses the AUM standard to bring you this list of the best finance ETFs right now.
1. Financial Select Sector SPDR Fund ETF (XLF)
XLF offers you incredibly broad exposure to the hierarchy of the U.S. financial sector. It follows the
This fund’s portfolio tilts heavily to the mega-cap stocks. About 65% of its asset allocation belongs to its top 15 holdings. This approach attracts investors and institutions seeking steady secure gains. It’s part of the reason XLF has a 10-year annual rate of return of 11.63%.
With an AUM of $33.23 billion, XLF has boundless liquidity and an unrivaled daily trading volume of 81 million. Its trading power, low ER of 0.13% and a 2% distribution yield make it the most popular choice for long-term financial exposure.
2. Vanguard Financials ETF (VFH)
For investors looking for more targeted holdings in the financial sector, VFH gives you broad exposure to U.S. banks. It uses its $9.4 billion AUM to provide you with a much deeper exposure to banks than the other financial ETFs — including XLF.
VFH mirrors the Financial Equities ETFdb. This index has 423 individual holdings. Wells Fargo (NYSE: WFC), Goldman Sachs (NYSE: GS) and American Express (NYSE: AXP) are among the heavyweights in this fund’s portfolio. VFH devotes 42.41% of its asset allocation to its top 10 holdings. However, its asset concentration goes much lower than the other finance ETFs. This strategy has contributed to an ARR of -19.05%. Its three-year rate of return is 6.04%.
Although XLF is the most cost-effective, VFH is the most affordable of the finance ETFs with a 0.10% ER. Plus, it has a healthy distribution yield of 3.50%. VFH is a good finance ETF to use as an anchor in your portfolio.
3. iShares U.S. Financials ETF (IYF)
IYF tracks the Dow Jones U.S. Financials Index. It offers you a wide position in the financial sector. With an AUM of $1.06 billion, IYF secures the No. 3 spot on this list.
This fund’s asset concentration is deeper than XLF — but not as deep as VFH. Its portfolio emphasizes its big-name stocks like Visa (NYSE: V), Berkshire Hathaway (NYSE: BRK.A) and Citigroup (NYSE: C). IYF commits 41.51% of its assets to its top 10 holdings. However, this ETF includes some mid- and small-caps. This fund’s sound strategy has produced a 10-year annual rate of return of 10.61%. Plus, its distribution yield is 2.61%. The fund’s only setback is a high ER of 0.39%
Best Online Brokers for Finance ETFs
If you are a new investor, finding good finance ETFs to trade is not as difficult as you may think. Online brokers specialize in making your trading experience as efficient as possible. Here are 3 of the best online brokers for trading finance ETFs.
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 offers premier innovative technology available to help you create your ETF trading center. Beginning ETF investors can use the web platform to easily begin trading activities. This platform gives you full use of tools and resources from almost any computer with internet access. Its features include graphic charts with technical studies, ordering tools and watchlists. Advanced traders can use TS Select or TS GO to access all the tools necessary for algorithmic and automated trading.
Beginners and advanced traders can take advantage of the simulated trading accounts. In real-time, you can do practice trading runs. You can backtest your trading strategies with decades of historical data. When you’re ready, you can start making $0 ETF trades on any of TradeStation’s award-winning platforms.
Magnifi is a marketplace that allows you, as the investor, to use common brokerage tools and AI to make the best decisions for your portfolio. Because you can pull up all the information you need on a given asset, you can easily invest in the assets that will give you the results you deserve and better match your strategy.
Search for the investment options that meet your needs, invest in specific categories or scan for assets in a price range that’s affordable for you.
Best for long-term investors and those who require a bit of client support, you can also learn more about investing from this platform, utilize the AI-powered investing assistant, enjoy commission-free investing, try the mobile app and take advantage of over 15,000 possible investment options. This makes Magnifi a good place to trade for both seasoned and novice traders.
Firstrade is very accommodating to ETF traders. It has $0 ETF trades and no enrollment requirements. Plus, you have access to all the tools you need to execute trades on 1 dashboard. It gives you quick views of ETF market events, customizable charts, alerts and streaming market news.
Your collapsible dashboard displays your account information and your positions. You can manage multiple accounts from a single location. It has the Quick Bar ordering panel that you can position anywhere you like.
5. TD Ameritrade
TD Ameritrade has a complete suite of industry-leading services and tools. It offers superb trading platforms, reference tools, education and customer service. You can plan ETF trading strategies and conduct trades in a seamless virtual trade room.
All 3 of its platforms deliver excellent service in the form of interactive charts, streaming market news, ETF trade positions and personalized trading performance analysis. For experienced traders, Ameritrade’s thinkorswim platform supplies top-level trading tools, alerts and a dedicated traders’ desk. Also, TD Ameritrade has $0 ETF trades and 24-hour trading — 5 days a week.
The Sum of Finance ETFs
During tough financial times, investors tend to gravitate toward the oak trees of Wall Street. These stocks provide stability and income. However, a closer examination of these securities reveals a double benefit — stability and growth. Finance ETFs provide you with an opportunity to reap these benefits while minimizing volatility.
Frequently Asked Questions
What is a finance ETF?
A finance ETF (exchange-traded funds) are funds that trade on exchanges and consist of a bundle of assets.
Are ETFs safer than stocks?
Because ETFs are made up of a diversification of stocks, they can be safer to trade than individual stocks.
What are the disadvantages of ETFs?
Despite the many benefits of ETFs, there are some disadvantages. For instance, you may have to pay fees to trade ETFs and they may not stay true to the underlying asset. Also, there are risks with ETFs just like with any investment.