How to Invest in Bank ETFs? Best 8 bank ETFs
As an investor, you always need exposure to different sectors. The bank Exchange Traded Funds gives you exposure to the financial and banking trends of the economy. This is your possibly great sector if you need exposure to economic trends.
The financial sector is attracting many investors as it plays a monopoly in handling money related investment, and every population in the world depend on banking as their main money-related transaction.
With the banking ETFs, you will be exposed to financial services like retirement planning, investment management, brokerage and even insurance services. You will also get exposure to banking services like making loans, facilitating payments, and taking deposits.
1. Benefits of Bank ETF
The Bank ETFs come with a wide scope of benefits when compared to other ETFs. They include;
They are highly diversified
The Bank ETFs like any other ETF tracks a broader range of stocks that gives you good exposure to equities, styles and market segments.
The ETFs are passively managed and require a lower expense ratio as compared to the actively managed funds. This allows you to invest in them with lower expense fees.
Immediately Reinvested Dividends
The bank ETFs allows for immediate reinvestment of the dividends realized thus creating a dividend drag.
They offer limited capital gains
The bank ETFs are more tax-efficient when compared to mutual funds as they are passively managed.
2. What is the Best Bank? Best 8 Bank ETF
1) Financial Select Sector SPDR Fund
2) Vanguard Financials Bank ETF
3) iShares U.S. Financial Services ETF
4) SPDR S&P Bank ETF
5) SPDR S&P Regional Banking ETF
6) INVESCO KBW Bank ETF
7) iShares MSCI Europe Financials
8) iShares Global Financials ETF
Financial Select Sector SPDR Fund
Financial Select Sector SPDR Fund is the largest and most popular Bank ETF that controls over $17 billion market cap. Among the 50 million shares traded daily, the Financial Select Sector SPDR Fund regularly tops among them.
This bank ETF nearly controls about 70 total holdings that include big name like megabank JPMorgan Chase &Co. Financial Select Sector SPDR Fund requires a low and affordable expense ratio of 0.13% annually.
Vanguard Financials Bank ETF
Vanguard Financials Bank ETF controls substantial assets worth $6 billion under their management. It also controls a volume in the ball bank of 700,000 shares traded daily. With this shares traded daily, Vanguard Financials Bank ETF assures you of remarkable returns on your investment.
Vanguard Financials Bank ETF allows you a tiny expense ratio of 0.1% that marks it as one of the cheapest bank ETFs to invest in.
It holds over 400 holdings among them being Bank of America Corp. and Wells Fargo & Co.
iShares U.S. Financial Services ETF
The iShares U.S. Financial Services ETF mainly deals with nontraditional service and banking services such as MasterCard and Visa. The MasterCard and Visa are widely and heavily used currently due to easy mobile banking among many banks. This makes it the right bank ETF for your investment.
It has a lineup of about 100 companies that gives it a broader market control. This broader market allows it to make high yields hence greater returns on you invested funds.
Being the holder of Visa, MasterCard and Visa have holdings amounting to $440 billion. This allows you to invest with it at an expense ratio of 0.42%.
SPDR S&P Bank ETF
SPDR S&P Bank ETF is a bank ETF that tracks the S&P regional banks select industry index that consists of all U.S.-listed regional banks.
It is further composed of small and middle cap banking industries by its not highly concentrated on them.
SPDR S&P Bank ETF regularly balances its portfolio to shoot for just more than 1% allocation in over 90 stocks across many sectors.
SPDR S&P Bank ETF requires you to incur an expense ratio of 0.35% but gives you diversified investment. As an investor who needs a wide view across banking stocks, then you need to have SPDR S&P Bank ETF in mind.
SPDR S&P Regional Banking ETF
If you are looking for a Bank ETF that guarantees you investment in bigger names in the Regional Banking ETFs, then you need to check on SPDR S&P Regional Banking ETF.
This is also another competitive Bank ETF from SPDR that that focuses on financial stocks. It has a mandate of excluding the major stock market international players and only feature on regional players in the stock market.
Despite SPDR S&P Regional Banking ETF focusing on regional banking services, it enjoys the control the Fifth Third Bancorp that has control over 1100 retail banking centres on the regions of Midwest and mid-Atlantic.
The SPDR S&P Regional Banking ETF assures you of great returns as retail banking centres, and regional banks are a choice for many. They are sent deep down on the grassroots level where many people can access. You only require an expense ratio of 0.35% to invest with SPDR S&P Regional Banking ETF.
INVESCO KBW Bank ETF
Unlike the Regional Banking ETF, the INVESCO KBW Bank ETF focuses on a total of 24 holdings that are multimillion financial participants. This is good news for you as an investor if you are more interested on multi-million projects rather than the small guys.
This is a unique bank ETF for multi-million projects. It does not focus on and stocks with less than $14 billion; if any of the listed stocks is below $14 billion, then INVESCO KBW Bank ETF does not focus on it. This indicates a huge dividend to you as an investor.
With such high investment standards, INVESCO KBW Bank ETF only requires an expense ratio of 0.35% to invest with them.
iShares MSCI Europe Financials ETF
There has been a concern on how to make sure the investors add international diversification to their portfolios and iShares MSCI Europe Financials ETF came in as a solution.
It holds over 80 holdings that are all megabanks that are familiar all over the globe that you, as an American-based investor, should be aware of. They include Switzerland’s UBS Group, Allianz of Germany and also the U.K Based HSBC holdings.
As an investor looking for a balanced portfolio, it is prudent to consider the European banks as much as you also consider your domestic investment opportunities in different financial sectors.
You don’t need to worry with iShares MSCI Europe Financials ETF as if only requires you to incur an affordable expense ratio of 0.48%.
iShares Global Financials ETF
Even though the iShares MSCI Europe Financials ETF introduces you to international financial holdings, you should not ignore the U.S bank ETFs altogether; thus, you need the iShares Global Financials ETF.
iShares Global Financials ETF simplifies your investment goals in that, instead of holding stock in Europe and in the U.S., it allows you to invest in global financial systems in a diversified way.
It enjoys over 200 holdings including the Morgan Stanley, the Royal Bank of Canada, and Mitsubishi UFJ Financial Group. This is a clear indication that you will get a wide exposure to different ETFs that you can choose from.
iShares Global Financials ETF’s investment companies are mostly made of the American companies that make up about its 50% of its fund and have major developed markets well represented on this Bank ETF.
With iShares Global Financials ETF, you only incur an expense ratio of 0.46% to invest with them.
As an investor, the Bank ETFs are one of the stocks that you can use to expand your portfolio. Here you shall share your profits by investing in a basket of banks and other financial service offering companies. If you are interested in finance and financial service fields, then this is the right investment to make.