The financial market is expanding owing to the evolving demands of both individuals and organizations. Moreover, the rising adoption of digital technologies, broad access to different types of loans, and the availability of alternative investment options are transforming market operations.

Amid this backdrop, investing in top financial ETFs such as SPDR S&P Regional Banking ETF (KRE), Vanguard Financials Index Fund ETF (VFH), and The Financial Select Sector SPDR Fund (XLF) could be wise for substantial gains.

With growing economic activities and wide accessibility of different loans, the consumer finance market is surging significantly. The global consumer finance market is projected to grow at a CAGR of 7.1%, resulting in a market volume of $196 trillion by 2029, boosted by easier access to loans and credits through digital payment platforms offering better growth opportunities.

Further, the increasing emphasis on financial inclusivity and the integration of AI and data analytics drive innovation and efficiency across the financial sector. Amid this, investors could invest in financial ETFs because of their vast exposure to the financial industry’s growth, the potential for higher yields, portfolio diversification, and the ability to capitalize on economic recovery.

Considering these trends, let’s analyze the fundamentals of three top Financial Equities ETFs, beginning with number 3.

ETF #3: SPDR S&P Regional Banking ETF (KRE)

KRE seeks to track the performance of the S&P Regional Banks Select Industry Index, employing a sampling strategy. The ETF invests at least 80% of its total assets in the securities that comprise the index. The fund gives investors exposure to a sub-sector of the financial sector.

KRE has $3.50 billion in assets under management (AUM). Moreover, the fund has a total of 142 holdings. Its top holdings include Western Alliance Bancorp (WAL) with a 2.45% weighting, Columbia Banking System, Inc. (COLB) at 2.43%, and Valley National Bancorp (VLY) at 2.35%.

The ETF’s net inflows were $585.89 million over the past three months. KRE has an expense ratio of 0.35%, lower than the 1.52% category average. Moreover, its NAV stood at $57.09 as of September 3, 2024.

KRE pays an annual dividend of $1.58, which yields 2.73% at the prevailing price level. Moreover, the fund’s dividends have increased at a CAGR of 5.7% over the past five years.

KRE has gained 18.9% over the past three months and 19.9% over the past six months to close the last trading session at $57.09.

KRE’s POWR Ratings are consistent with its strong fundamentals. The ETF has an overall A rating, equating to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

KRE has an A grade for Trade and Buy & Hold. It is ranked #3 among 41 ETFs within the B-rated Financial Equities ETFs group.

To access all of KRE’s POWR Ratings, click here.

ETF #2: Vanguard Financials Index Fund ETF Shares (VFH)

VFH is an exchange-traded fund launched and managed by Vanguard Equity Index Group that tracks the MSCI US IMI 25/50 Financials Index. It is passively managed to hold US financials stocks across all market caps and uses a market-cap selection and weighting scheme to capture the broader financials market.

With $10.10 billion in AUM, VFH’s top holding is JPMorgan Chase & Co. (JPM), which has an 8.63% weighting in the fund. It is followed by Berkshire Hathaway Inc. Class B (BRK.B) at 8.12% and Mastercard Incorporated Class A (MA) at 5.46% weighting. The fund has a total of 405 holdings.

VFH has an expense ratio of 0.10%, lower than the category average of 1.52%. The fund has a NAV of $109.77 as of September 3, 2024. The ETF’s net inflows were $61.55 million over the past three months.

VFH pays a $1.91 annual dividend yielding 1.72% at the prevailing price level. The fund’s dividend payouts have grown at a CAGR of 5% over the past five years. Also, VFH has raised its dividends for three consecutive years.

VFH has gained 9.4% over the past three months and 24.9% over the past nine months to close the last trading session at $109.75.

VFH’s POWR Ratings reflect its strong outlook. The ETF’s overall A rating equates to a Strong Buy in our proprietary rating system.

VFH has an A grade for Trade and Buy & Hold and a B for Peer. Of the 41 ETFs in the B-rated Financial Equities ETFs group, VFH is ranked #2.

Click here to see all the VFH ratings.

ETF #1: The Financial Select Sector SPDR Fund (XLF)

XLF provides efficient exposure to the US financials segment. Its cap-weighted, S&P 500-only portfolio concentrates on large banks and avoids small caps. It invests in companies from industries like diversified financial services, insurance, commercial banks, and capital markets. The fund tracks the Financial Select Sector Index.

The fund has an AUM of $45.48 billion. Its top holdings include Berkshire Hathaway Inc. Class B (BRK.B) with a 13.55% weighting, followed by JPMorgan Chase & Co (JPM) at a 10.20% weighting, and Visa Inc. Class A (V) at 6.90%. XLF has a total of 73 holdings.

The fund has an expense ratio of 0.09%, lower than the category average of 1.34%. Over the past three months, XLF fund inflows came in at $3.22 billion, and $3.67 billion for the past six months.

XLF pays an annual dividend of $0.65, which translates to a yield of 1.43% at the current share price. Its dividend payouts have grown at a CAGR of 3.65% over the past five years. XLF has paid its dividends for 24 consecutive years.

XLF has surged 19.5% over the past six months and 32.2% over the past year to close the last trading session at $45.40. The fund has a NAV of $45.41 as of September 3, 2024.

XLF’s POWR Ratings reflect its strong outlook. The ETF has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.

XLF has an A grade for Buy & Hold and Trade. It also has a B grade for Peer. The fund has topped the list of 41 ETFs in the same group.

To access all the POWR Ratings for XLF, click here.

What To Do Next?

43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.

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XLF shares were trading at $45.35 per share on Wednesday afternoon, down $0.05 (-0.11%). Year-to-date, XLF has gained 21.55%, versus a 16.84% rise in the benchmark S&P 500 index during the same period.

About the Author: Mangeet Kaur Bouns

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions. More...

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