Donald Trump's presidential victory sent the markets into overdrive, with the major indices hitting simultaneous highs in 2016 for the first time since 1999. And even though the bull market is entering its seventh year, most analysts still see upside potential for 2017, especially for financial stocks. (See also: Party Like It's 1999: 4 Stock Indices Hit Simultaneous Highs.)
If President Trump lives up to his campaign promises, banks will see a rollback in major regulations, Dodd-Frank chief among them. In addition, 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 exchange-traded funds (ETFs) are a great alternative to hedge your risk and gain exposure to movements in the financial sector.
All year-to-date (YTD) performance figures reflect the period from Jan. 1, 2017, through August 3, 2017. Funds were selected based on a combination of assets under management and performance. Figures were accurate as of August 4, 2017.
- Issuer: Fidelity
- Assets Under Management: $939.78 million
- YTD Performance: 8.59%
- Expense Ratio: 0.08%
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 410 stocks, with the top 10 holdings comprising about 44% of the fund's portfolio. Household names such as JPMorgan Chase & Co. (JPM), Wells Fargo & Company (WFC) and Bank of America Corporation (BAC) take the top three slots, with a combined total weight of about 23%. FNCL's one-year returns were 33.87%, and its three-year annualized returns were 14.42%. The fund's inception date is October 2013.
- Issuer: BlackRock
- Assets Under Management: $1.85 billion.
- YTD Performance: 9.42%
- 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. The fund's top 10 holdings make up roughly 39% of total assets, led by JPMorgan Chase & Co. (JPM) at 6.86%. IYF's one-year, three-year and five-year annualized returns are robust at 27.02%, 12.56% and 16.97%, respectively. (See also: Searching for Value in a Hot Sector.)
- Issuer: Invesco
- Assets Under Management: $1.71 billion
- YTD Performance: 9.80%
- 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. Its top holdings include HSBC Holding PLC (HSBC) and Barclays PLC (BCS). PGF's one-year, three-year and five-year annualized returns are 4.43%, 8.08% and 7.06%, respectively. The fund has a healthy 12-month distribution rate of 5.28%. (See also: PGF vs. KBE: Comparing Financials ETFs.)
- Issuer: State Street Global Advisors
- Assets Under Management: $3.61 billion
- YTD Performance: -0.54%
- Expense Ratio: 0.35%
This fund is benchmarked to the S&P Regional Banks Select Industry Index, which is made up of regional banks and thrift banks. The fund uses a representative sampling strategy to select stocks and currently holds 102 equities. KRE has reported inflows of over $205 million in 2017. Its top 10 holdings comprise roughly 23% of the total portfolio, and they include CIT Group Inc. (CIT) and Zions Bancorporation (ZION). The fund's one-year, three-year, and five-year annualized performance figures are impressive at 41.72%, 15.16%, and 17.81%, respectively. (See also: Fed Bets Bring Inflows to Financial Services ETFs.)