This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Dipping Into Financials With ETFs

iShares Dow Jones U.S. Regional Banks Index Fund

Type: Banking ETF. Others in this category: KBW Bank ETF (KBE), KBW Regional Banking ETF (KRE), Merrill Lynch Regional Bank HOLDRs (RKH) and PowerShares Dynamic Banking Portfolio (PJB).

What it does: IAT tracks the iShares Dow Jones U.S. Select Regional Banks Index, which is composed of small and midsize regional U.S. banks. IAT employs a three-year asset weighting methodology to determine which regional banks will be included in the fund.

Who it's for: While regional banks have traditionally offered investors more conservative exposure to the banking industry, many of the large regional banks have been ensnared by the same mortgage difficulties as their large-cap peers. Since IAT has a capitalization-weighted methodology, investors should be mindful that a large portion of the holdings will be held in the largest of the regional banks.

IAT's top holding, Fifth Third Bancorp (FITB) comprises nearly 19% of the portfolio. This concentration makes IAT's investors particularly sensitive to FITB's news and intraday trading patterns. As healthy banks are weeded out from "zombie" banks, IAT could be a good instrument to pick up exposure to regional banks that weather the crisis.

Top 10 Holdings: U.S. Bancorp, PNC Financial Services (PNC), BB&T (BBT), Northern Trust (NTRS), Hudson City Bancorp (HCBK), SunTrust (STI), Regions Financial (RF), MT&T Bank (MTB), Fifth Third Bancorp, New York Community Bancorp (NYB).

Liquidity and fees: IAT has a 0.48% fee. The three-month average daily trading volume is 523,346.

Before investing in any financial ETF, you should examine your risk/reward tolerance. When scouting financial ETFs in particular, however, investors should be particularly sensitive to top-heavy portfolios where a single component could sway the entire investment.

For an overall large-cap exposure to the sector, XLF might be the best choice for cautious investors just tiptoeing back into financials. PGF and other preferred ETFs offer a more fixed-income approach to financial sector investing, while subsector ETFs like IAT allow investors to pick niches that they believe will flourish.
Don Dion is the President and Chief Investment Officer of Dion Money Management and the Publisher of the Fidelity Independent Adviser family of newsletters. He provides commentary on the financial markets, with a specific emphasis on exchange traded funds and mutual funds to his clients and subscribers.
3 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
VFH $41.96 0.79%
IAT $29.91 0.50%
KBE $27.90 0.52%
XLF $20.52 0.61%
PGF $18.14 1.00%


Chart of I:DJI
DOW 16,035.03 +20.65 0.13%
S&P 500 1,870.43 +18.22 0.98%
NASDAQ 4,342.8310 +74.0680 1.74%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs