Banking Fund Offers Sector Diversification

The SPDR S&P 500 Bank Fund ETF (KBE) combines two different ideas into one solution.

Many exchange-traded funds (ETFs) that target a specific sector focus on well-known names to attract interest of investors. However, there are some investors who are more interested in funds that provide exposure beyond the typical large-cap stocks in the market.

KBE???s marriage of these two ideas comes as a result of its equal-weighted approach to the banking stocks it holds. This means that an investment in KBE offers easy exposure to large-, mid- and small-cap banks in significant amounts.

Admittedly, this makes the fund potentially riskier than some ETFs, but also more interesting. For instance, unlike a more focused ETF such as the SPDR S&P Regional Banking ETF (KRE), KBE offers investors access to a wide array of companies and sub-industries in its portfolio. This list includes: asset management & custody banks, diversified banks, regional banks, other diversified financial services, and thrifts & mortgage finance. Diversification is one of the most appealing points of many ETFs, and KBE is a great example of this appeal.

Click here to read the full article, “Banking Fund Offers Sector Diversification.