Fidelity vs. Vanguard Financials: Which Financials ETF Offers More Bang for Your Buck?

Both the Fidelity MSCI Financials Index ETF (FNCL +1.48%) and Vanguard Financials ETF (VFH +1.42%)  target the broad U.S. financial sector. These funds capture banks, insurance providers, and capital markets firms, offering investors a low-cost way to gain diversified exposure to the engines of the American economy through passively managed portfolios.

While the funds provide nearly identical market exposure, the Fidelity fund offers a lower expense ratio while the Vanguard fund features significantly deeper liquidity.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

The Fidelity fund is slightly more affordable with an expense ratio of 0.08% compared to 0.09% for the Vanguard fund. Additionally, the Fidelity fund currently offers a higher payout, with a dividend yield of 1.7% versus 1.5% for the Vanguard fund.

Performance & risk comparison

What’s inside

Vanguard Financials ETF targets financial services companies with a heavy tilt toward diversified banks and insurance. Its portfolio consists of about 430 holdings, and its largest positions include JPMorgan Chase at 9.15%, Berkshire Hathaway at 8.05%, and Mastercard at 4.5%. This fund was launched in 2004 and has a trailing-12-month dividend of $1.94 per share.

Fidelity MSCI Financials Index ETF holds about 390 stocks with a nearly identical sector breakdown. Its largest positions include JPMorgan Chase at 9.8%, Berkshire Hathaway at 8.07%, and Visa at 6.6%. The Fidelity fund was launched in 2013 and paid $1.23 per share over the trailing 12 months.

Fidelity Covington Trust – Fidelity Msci Financials Index ETF

Today’s Change

(1.48%) $1.13

Current Price

$77.41

Key Data Points

Day’s Range

$76.76 – $77.47

52wk Range

$67.76 – $80.31

Volume

5

For more guidance on ETF investing, check out the full guide at this link.

What it means for investors

Both the VFH and FNCL ETFs track the MSCI USA IMI Financials Index, which captures large-, mid-, and small-cap financials stocks. The Vanguard fund is much larger in terms of total assets, but the funds’ returns, dividends, and max drawdowns are nearly identical. The larger asset pool provides more liquidity for investors, but the Fidelity fund offers slightly lower fees and a slightly higher dividend yield, which may appeal to investors who are looking to maximize their total income.

Both funds give investors access to a large pool of financial stocks, including all of the industry leaders, and employ diversification strategies to ensure that no single holding becomes too large, regardless of market cap. They’re both solid, affordable ways to play the financials space broadly without having to follow the moves of individual companies. Savvy investors should remember that financials stocks are highly cyclical and sensitive to the health of the overall economy. I’d choose FNCL here simply for its lower fees and higher yield, but both funds could be solid additions to a diversified portfolio.