ETF Talk

This Fund Provides Dedicated Exposure to U.S. Banks

We turn our attention this week to a series of financial sector exchange-traded funds (ETFs), including today’s look at <strong>SPDR S&amp;P Bank ETF (KBE)</strong>.

KBE tracks an equal-weighted index of U.S. banking stocks. This focus differentiates KBE from many cap-weighted funds, since it puts giant banks and small banks on equal footing.

This fund gives investors exposure to a slice of the financial sector that historically has exhibited significant volatility but also is capable of turning in strong performances under the right circumstances. Frequently, investors buy into a high-volatility ETF, such as KBE, with the intention to benefit from short-term upward movements in the financial sector instead of a long-term buy-and-hold strategy.

KBE invests most of its $3.1 billion total assets in the securities that comprise the index it tracks. The fund also holds cash and invests in equities that are not in the index, as well as cash equivalents and money market instruments, such as repurchase agreements and money market funds. These actions increase the fund’s overall liquidity.

The fund is very liquid and has a competitive expense ratio of 0.35%. KBE also pays out a quarterly dividend. The most recent dividend was a $0.184 distribution on December 16, 2016. KBE has a dividend yield of 1.67%.

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