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Donald Trump’s surprise presidential victory has sent the markets into overdrive, with the major indices hitting simultaneous highs last month for the first time since 1999. And even though the bull market is entering its seventh year, most analysts still see an upside for 2017, especially for financial stocks.
If President-elect Trump lives up to his campaign promises, banks will see a rollback in major regulations, Dodd-Frank chief among them. And lower taxes may pave the way for higher interest rates and inflation – sweet prospects for the nation’s financial institutions which stand to profit when interest rates rise. If you’re not in the mood to filter individual stocks, these top bank ETFs are a great alternative to hedge your risk and gain exposure to movements in the financial sector.
All year-to-date performance figures reflect the period from January 1, 2016 through November 30, 2016. Funds were selected based on a combination of assets under management and performance.
1. Fidelity MSCI Financial Index ETF (FNCL)
- Issuer: Fidelity
- Assets Under Management: $438 million
- YTD Performance: 26.62%
- Expense Ratio: 0.084%
This passively-managed fund seeks to track the MSCI USA IMI Financials Index, with at least 80% of its assets invested in companies on the index. The fund currently has a basket of 374 stocks. Top 10 holdings comprise about 44% of the fund’s portfolio. Household names such as JPMorgan Chase & Co. (JPM), Wells Fargo & Co. (WFC) and Bank of America Corp. (BAC) take the top three slots, with a combined total of about 23%. Since its inception in 2013, the fund has returned 7.19%.
2. iShares US Financials ETF (IYF)
- Issuer: BlackRock
- Assets Under Management: $1.9 billion.
- YTD Performance: 12.51%
- Expense Ratio: 0.44%
This fund is benchmarked to the Dow Jones U.S. Financial Index and is heavily weighted toward the bank and diversified financials sectors, with a little real estate, insurance and software to round out the portfolio. Top 10 holdings make up roughly 39% of total assets, led by Berkshire Hathaway, at 6.83%.
Since its inception in May 2000, IYF has returned 86.91%. Its one-year, three-year, and five-year returns are robust, at 9.93%, 31.07%, and 120.92% respectively.
3. PowerShares Financial Preferred Portfolio ETF (PGF)
- Issuer: Invesco
- Assets Under Management: $1.66 billion
- YTD Performance: 0.99%
- Expense Ratio: 0.63%
This fund is relatively low risk and delivers steady, if unspectacular, returns. It is based on the Wells Fargo Hybrid and Preferred Securities Financial Index. About 90% of the fund’s assets are in equities from companies on the index. The fund is rebalanced and reconstituted on a monthly basis.
Top holdings include HSBC Holding PLC (HSBC) and Barclays Bank PLC. The fund has returned 3.86% since its inception in 2006. It has a healthy 12-month distribution rate of 5.88%.
4. SPDR S&P Regional Banking ETF (KRE)
- Issuer: State Street Global Advisors
- Assets Under Management: $3.55 billion
- YTD Performance: 26.72%
- Expense Ratio: 0.35%
This fund is benchmarked to the S&P Regional Banks Select Industry Index, which is comprised of regional banks and thrifts. The fund uses a representative sampling strategy to select stocks and currently holds 97 equities.
Top 10 holdings comprise roughly 45% of the total portfolio, and include Fifth Third Bancorp (FITB) and SunTrust Banks Inc. (STI). Its one-year, three-year, and five-year performance figures are solid at 17.06%, 11.36%, and 19.38%, respectively.