Financial ETFs: Look Under the Hood to Protect Yourself

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If you're an investor in financial exchange traded funds (ETFs), you probably saw your holdings drop when the SEC announced that it would press charges against Goldman Sachs. But depending on which ETFs you held, your exposure to Goldman's stock selloff would have differed.

According to Ron Rowland of Money and Markets , there are seven ETFs that have 5% or more of their assets in Goldman Sachs (NYSE: GS ). These seven, which do not include leveraged ETFs, are:

  • iShares Dow Jones U.S. Broker-Dealers (NYSEArca: IAI ) - 11%
  • SPDR KBW Capital Markets ( NYSEArca : KCE ) - 8%
  • WisdomTree LargeCap Value Fund ( NYSEArca : EZY ) - 7%
  • WisdomTree LargeCap Growth Fund ( NYSEArca : ROI ) - 7%
  • iShares Dow Jones U.S. Financial Services ( NYSEArca : IYG ) - 5%
  • Claymore/Clear Global Exchanges, Brokers & Asset Managers ( NYSEArca : EXB ) - 5%
  • SPDR Select Sector Financials ( NYSEArca : XLF ) - 5%

The list goes to show that picking ETFs to invest in is no small matter. All of these funds invest in at least one financial company while targeting vastly different market sectors. Wanting exposure to financials is not enough. You need to pick the ETFs that fit into your investment strategy.


For example, considering the potential for the SEC to press charges against other banks, you may want to reconsider an investment in IAI if your strategy is to invest in financials with a minimal risk profile. Instead, you may consider iShares Dow Jones Regional Banks (NYSEArca: IAT ) or KBW Regional Bank (NYSEArca: KRE ) , which would reduce your exposure to the banks most likely to be hit with lawsuits. First Trust NASDAQ ABA Community Bank (NASDAQ: QABA ) is another option with no exposure to the Wall Street behemoths.

When investing in ETFs, make sure to do your homework and understand that all ETFs are not equal, even when they invest in the same companies.

For more stories on ETFs, visit our ETF 101 category .

Sumin Kim contributed to this article.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.




This article appears in: Investing , ETFs


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