Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks Bull Market Smoking Gun - 25th May 24
Congress Moves against Totalitarian Central Bank Digital Currency Schemes - 25th May 24
Government Tinkering With Prices Is Like Hiding All of the Street Signs - 25th May 24
Gold Mid Tier Mining Stocks Fundamentals - 25th May 24
Why US Interest Rates are a Nothing Burger - 24th May 24
Big Banks Are Pressuring The Fed To Losen Protection For Depositors - 24th May 24
Another Bank Failure: How to Tell if Your Bank is At Risk - 24th May 24
AI Stocks Portfolio and Tesla - 23rd May 24
All That Glitters Isn't Gold: Silver Has Outperformed Gold During This Gold Bull Run - 23rd May 24
Gold and Silver Expose Stock Market’s Phony Gains - 23rd May 24
S&P 500 Cyclical Relative Performance: Stocks Nearing Fully Valued - 23rd May 24
Nvidia NVDA Stock Earnings Rumble After Hours - 22nd May 24
Stock Market Trend Forecasts for 2024 and 2025 - 21st May 24
Silver Price Forecast: Trumpeting the Jubilee | Sovereign Debt Defaults - 21st May 24
Bitcoin Bull Market Bubble MANIA Rug Pulls 2024! - 19th May 24
Important Economic And Geopolitical Questions And Their Answers! - 19th May 24
Pakistan UN Ambassador Grows Some Balls Accuses Israel of Being Like Nazi Germany - 19th May 24
Could We See $27,000 Gold? - 19th May 24
Gold Mining Stocks Fundamentals - 19th May 24
The Gold and Silver Ship Will Set Sail! - 19th May 24
Micro Strategy Bubble Mania - 10th May 24
Biden's Bureau of Labor Statistics is Cooking Jobs Reports - 10th May 24
Bitcoin Price Swings Analysis - 9th May 24
Could Chinese Gold Be the Straw That Breaks the Dollar's Back? - 9th May 24
The Federal Reserve Is Broke! - 9th May 24
The Elliott Wave Crash Course - 9th May 24
Psychologically Prepared for Bitcoin Bull Market Bubble MANIA Rug Pull Corrections 2024 - 8th May 24
Why You Should Pay Attention to This Time-Tested Stock Market Indicator Now - 8th May 24
Copper: The India Factor - 8th May 24
Gold 2008 and 2022 All Over Again? Stocks, USDX - 8th May 24
Holocaust Survivor States Israel is Like Nazi Germany, The Fourth Reich - 8th May 24
Fourth Reich Invades Rafah Concentration Camp To Kill Palestinian Children - 8th May 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Ride the Financial Sector Rally Using ETFs

Companies / Exchange Traded Funds Oct 15, 2009 - 09:41 AM GMT

By: Ron_Rowland

Companies

Best Financial Markets Analysis ArticleI’ve had great success with sector-based exchange traded funds (ETFs) over the years. And that’s because — despite whatever problems the broader stock market may be having — usually one or more niches are still doing well.

This year one of the leading niches has been financial services. That definitely wasn’t the case last year at this time, when many banks were teetering on the edge of failure. They survived (most of them, anyway) thanks only to government bailouts.


Financials are rocketing higher this year!

Now stocks from this sector are zooming higher! In fact, the S&P 500 Financial Index jumped 153 percent from its March 6 low through October 12.

Will the financial rally continue? Not forever — the banks still have a lot of problems, and the Fed can’t keep rescuing them indefinitely. Even so, with many of these stocks still 50 percent or more below their 2007 peak, there’s plenty of profit potential left for you.

And if you’re interested in playing this uptrend, you can pick from a nice selection of ETFs. In fact, there are currently 34 ETFs that focus on the financial sector. Here are a few you may want to consider. Some are very diversified, while others are more specialized. These Broad-Based ETFs Cover the Entire Financial Sector

The lines between the different kinds of financial services firms are mighty fuzzy these days. Huge conglomerates like Bank of America (BAC) and JPMorgan Chase (JPM) are involved in everything from banking … to stock underwriting … to life insurance.

If you want to own these leaders, plus a cross-section of smaller companies, consider one of these ETFs:

  • SPDR Select Sector Financial (XLF)
  • iShares Dow Jones U.S. Financial (IYF)
  • Vanguard Financials ETF (VFH)

All of these funds have reasonable fees and good liquidity. XLF is focused exclusively on large-cap financial stocks. The other two own some smaller companies as well, but all three are well-diversified within the sector.

Unfortunately, these funds are missing some potentially great upside by not owning financial stocks from outside the U.S. For that reason, you might want to look at …

Global and International Financial ETFs

Asia and Europe have some colossal — and highly profitable — financial services stocks. But you usually won’t find them in U.S.-focused ETFs or mutual funds.

Asia is a financial powerhouse.
Asia is a financial powerhouse.

If you want to be diversified, both geographically as well as within the industry, you need a global or international fund. (Note that these two words don’t mean the same thing. Global means “the whole world;” international means “the whole world except the U.S.”)

Right now there’s only one ETF that gives you the worldwide financial sector in one package: iShares S&P Global Financials (IXG). Several international funds cover the sector outside the U.S., though. A couple to look at are:

  • WisdomTree International Financial (DRF)
  • SPDR S&P International Financial (IPF)

Combine one of these funds with a good U.S. financials sector ETF (like the three named above) and you’ll have the financial world in your hands.

Don’t Forget About Niche Financials ETFs

ETFs let you focus on special niches of  financial services.
ETFs let you focus on special niches of financial services.

Now, what if you want to get more aggressive and zero in on particular parts of the financial sector? ETFs can help you there, too.

Financial services consist of three primary sub-sectors: Banking, insurance, and brokerage (sometimes called “capital markets”). You can get ETFs that are devoted to each of these niches …

  • For banking firms, look at SPDR KBW Bank ETF (KBE), iShares Dow Jones U.S. Regional Banks (IAT), or PowerShares Dynamic Banking (PJB).
  • For insurance companies, you can pick from iShares Dow Jones U.S. Insurance (IAK), SPDR KBW Insurance ETF (KIE), or PowerShares Dynamic Insurance (PIC).
  • For brokerages, consider SPDR KBW Capital Markets ETF (KCE) or iShares Dow Jones U.S. Broker-Dealers (IAI). Additionally, there is Claymore/Beacon Global Exchanges, Brokers and Asset Managers (EXB) — which also wins the award for longest fund name in today’s column!

However, before jumping into any of these funds, be sure to check the average trading volume, as some of the niche products may have less-than-desirable liquidity.

But always remember: With ETFs, you can now build a financial sector portfolio that’s customized to your needs and preferences — not what some overpaid portfolio manager thinks you should have. The tools are available. All you have to do is use them!

Best wishes,

Ron

P.S. I’m now on Twitter. Please follow me at http://www.twitter.com/ron_rowland for frequent updates, personal insights and observations about the world of ETFs.

If you don’t have a Twitter account, sign up today at http://www.twitter.com/signup and then click on the ‘Follow’ button from http://www.twitter.com/ron_rowland to receive updates on either your cell phone or Twitter page.

This investment news is brought to you by Money and Markets . Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com .

Money and Markets Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in