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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

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

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,563.30 -317.06 -1.88%
S&P 500 1,930.67 -39.40 -2.00%
NASDAQ 4,369.7730 -93.1290 -2.09%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs