If you are interested in broad exposure to financial services – a broad segment of the equity market, look no further than the iShares US Financial Services ETF (IYG – Free report), a passively managed listed index fund launched on 06/12/2000.
Passively managed ETFs are increasingly popular with institutional and retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long-term investors.
Sector ETFs also give investors access to a broad group of companies in particular sectors that offer low-risk, diversified exposure. Financials – Broad is one of 16 major Zacks sectors within the Zacks Industry Classification. He is currently ranked 2, which puts him in the top 13%.
The fund is sponsored by Blackrock. It has amassed assets of over $1.50 billion, making it one of the largest 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 US Financial Services Index before fees and expenses.
The Dow Jones US Financial Services Index measures the performance of the financial services sector of the US stock market.
Investors should also pay attention to an ETF’s expense ratio. Lower cost products will perform better than higher cost ones, assuming all other metrics remain the same.
The annual operating expense of this ETF is 0.39%, putting it on par with most peer products on the market.
It has a 12-month dividend yield of 1.87%.
Sector exposure and main holdings
Although ETFs provide diversified exposure that minimizes single-stock risk, it’s still important to review a fund’s holdings before investing. Fortunately, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has the largest allocation to the financials sector – about 83% of the portfolio, followed by information technology.
Regarding individual holdings, Jpmorgan Chase & Co (JPM – Free Report) accounts for approximately 9.58% of total assets, followed by Visa Inc Class A (V – Free Report) and Mastercard Inc Class A (MY – free report).
The top 10 holdings represent approximately 52.14% of total assets under management.
Performance and risks
The ETF has lost around -14% so far this year and is down around -15.73% over the past year (as of 11/16/2022). During this last 52-week period, it traded between $140.77 and $202.95.
The ETF has a beta of 1.17 and a standard deviation of 33.21% for the three-year period, making it a high-risk pick in the space. With approximately 111 holdings, it effectively diversifies company-specific risks.
IShares US Financial Services ETF holds a Zacks ETF rating of 2 (buy), which is based on the asset class’s expected return, expense ratio, and momentum, among other factors. For this reason, IYG is an exceptional option for investors seeking exposure to the financial ETF segment of the market. There are other additional ETFs in the space that investors might also consider.
Vanguard Financials ETF (VFH – Free Report) tracks the MSCI US Investable Market Financials 25/50 Index and the Financial Select Sector SPDR ETF (XLF – Free Report) tracks the Financial Select Sector Index. Vanguard Financials ETF has $9.27 billion in assets, Financial Select Sector SPDR ETF has $32.63 billion. VFH has an expense ratio of 0.10% and XLF charges 0.10%.
To learn more about this product and other ETFs, find products that fit your investment goals, and read articles about the latest developments in the ETF investment universe, please visit Zacks ETF Center.