“The fund’s comprehensive sector portfolio mitigates company-specific risk while offering pure exposure to the U.S. financial-services industry. This ETF offers one-stop exposure to the largest financial-services firms in the sector and is suitable for investors seeking to overweight the financials sector within a broadly diversified portfolio,” according to Morningstar.
Despite its advantages, including valuations that are below that of the broader market and the fact that it still resides nowhere near its pre-crisis highs, XLF has not been on the receiving end of investors’ confidence in 2015. Investors have pulled nearly $5 billion combined from XLF and the iShares U.S. Financials ETF (NYSEArca: IYF) this year. [Bank ETFs Still Lagging]
“The U.S. economy has continued its slow recovery, with improving housing data, stabilizing manufacturing, and decent retail sales. In 2015’s first quarter, the U.S. financial-services sector slightly underperformed the broader market after big banks fell a bit short, both on the revenue and expenses side at the end of 2014. Also weighing on financial stocks was ongoing margin pressure,” adds Morningstar.
Financial Select Sector SPDR