Financial sector stocks have slid back along with the broader markets over the past month, but the auspicious start to this earnings season has helped bank picks and financial sector exchange traded funds regain some of their lost strength.
IYF with 257 holdings has a less top-heavy weighting, with its top ten holdings account for 37.8% of the overall fund, compared to XLF which has 83 holds, with its top ten accounting for 50.8% of the overall fund. The iShares fund also favors the banks and financial services sub-sectors, whereas the SPDR ETF holds a higher weighting in insurance companies.
On a cost basis, XLF is cheaper at 0.18% compared to IYF's expense ratio of 0.47%.
For those looking for small, regional names, SPDR S&P Regional Banking ETF (KRE) and iShares Dow Jones U.S. Regional Bank Index Fund (IAT) fulfill that role. KRE has an expense ratio of 0.35% and IAT has an expense ratio of 0.47%.
The SPDR KRE ETF offers a more diversified approach, with 76 holdings and the top holding accounting for 1.9% of the overall portfolio. In comparison, the iShares IAT fund has 62 holdings and allocates 21.5% to USB.
It should be noted that regional banks, given their small size, are more volatile than their larger counterparts.
Additionally, those looking for an all-encompassing financial sector ETF may consider the SPDR S&P Bank ETF (KBE), which holds both large and regional banks. With 40 holdings, the KBE equally-weights its component stocks, with its top holding at 2.8%. The fund has an expense ratio of 0.35%.
Financial Select Sector SPDR
Max Chen contributed to this article.
Disclosure: I am long KRE. Tom Lydon's clients own KRE.