Morningstar Rating

ETF Research and Analysis

by Robert Goldsborough
Vanguard Financials ETF VFH is appropriate as a tactical satellite holding for broad exposure to the U.S. financial-services sector. Unlike many other U.S. equity sectors, the financial-services sector still has never come   Read more 

Bull Case

VFH offers comprehensive coverage of the U.S. financials sector, which mitigates company-specific risk. It also has the lowest expense ratio of any major financial services ETF.
Despite net interest margin pressure in the short term, over the longer term, higher interest rates should help U.S. banks.
Banks also are in general better capitalized than in the past, with improving capital ratios, and banks have done a fine job cutting expenses. Read more 

Bear Case

Our analysts don't believe that interest spread revenue at banks will grow anytime soon.
If interest rates rise, that could hamper underwriting activity at investment banks.
European sovereign debt problems could cascade across the Atlantic and force the U.S. banking system to absorb some losses. Read more 

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