Should You Invest in the Vanguard Financials Index Fund ETF Shares (VFH)?

Launched on January 26, 2004, the Vanguard Financials Index Fund ETF Shares (VFH) is a passively managed exchange traded fund designed to provide a broad exposure to the Financials - Broad segment of the equity market.

While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

Sector ETFs also provide investors access to a broad group of companies in particular sectors that offer low risk and diversified exposure. Financials - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 4, placing it in top 25%.

Index Details

The fund is sponsored by Vanguard. It has amassed assets over $13.91 billion, making it one of the largest ETFs attempting to match the performance of the Financials - Broad segment of the equity market. VFH seeks to match the performance of the MSCI US Investable Market Financials 25/50 Index before fees and expenses.

The MSCI US Investable Market Index (IMI)/Financials 25/50 measures the investment return of stocks in the financial sector.

Costs

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.

Annual operating expenses for this ETF are 0.09%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 1.64%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Financials sector -- about 100% of the portfolio.

Performance and Risk

The ETF has added about 7.3% so far this year and is up about 9.57% in the last one year (as of 08/31/2026). In that past 52-week period, it has traded between $117 and $142.74.

The ETF has a beta of 0.90 and standard deviation of 16.49% for the trailing three-year period, making it a medium risk choice in the space. With about 429 holdings, it effectively diversifies company-specific risk.

Alternatives

Vanguard Financials Index Fund ETF Shares carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, VFH is a good option for those seeking exposure to the Financials ETFs area of the market. Investors might also want to consider some other ETF options in the space.

iShares U.S. Financials ETF (IYF) tracks Dow Jones U.S. Financials Index and the State Street Financial Select Sector SPDR ETF (XLF) tracks Financial Select Sector Index. iShares U.S. Financials ETF has $4.32 billion in assets, State Street Financial Select Sector SPDR ETF has $56.00 billion. IYF has an expense ratio of 0.38%, and XLF charges 0.08%.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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This article originally published on Zacks Investment Research (zacks.com).

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