Financial exchange traded funds (ETFs) are a bad deal these days, right? Not so fast. The Claymore/Clear Global Exchanges, Brokers (EXB), which launched in June, is actually up 11.7% in the last three months, and it’s one of a few that have had positive returns of late. Meanwhile, the Financial Select Sector SPDR (XLF) is down 11.4%. The fund includes diversified financial services, insurance companies, commercial banks, capital markets and REITs. The SPDRs (SPY) is up 0.1%. The financial sector is largest in the S&P 500.

In the last three months, EXB has been the top-performing financial sector product. A few others, however, have been up in this time frame:

  • WisdomTree International Financial Sector Fund (DRF), up 4.4%
  • PowerShares Dynamic Financials Sector Portfolio (PFI), up 3.3%
  • iShares Dow Jones U.S. Broker-Dealers Index Fund (IAI), up 1.4%
  • KBW Capital Markets (KCE), up 5.8%
  • PowerShares Dynamic Insurance Portfolio (PIC), up 0.6%

How does a financial ETF manage to be up, in double digits at that, at a time when the markets have been experiencing so much volatility? EXB does it by excluding the currently unattractive segments of the sector: namely, banking, insurance and real estate. It instead comprises the growth businesses of exchanges, brokers and asset managers.

The fund’s top holdings include: CME Group (CME) with 8.9%; Deutsche Boerse at 7.7%, Hong Kong Exchange & Clearing at 7.5%; NYSE Euronext (NYX) with 5.4%; and Goldman Sachs (GS) at 4.5%.

The performance of this fund and the other funds above stress once again that you should never judge an ETF by its cover, or sector. Look at what’s held in the fund before deciding whether it’s a wise addition to your portfolio or an underperformer you’d best avoid.


The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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