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Should You Invest in the Fidelity MSCI Financials Index ETF (FNCL)?

Looking for broad exposure to the Financials - Broad segment of the equity market? You should consider the Fidelity MSCI Financials Index ETF (FNCL), a passively managed exchange traded fund launched on 10/21/2013.

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.

Sector ETFs are also funds of convenience, offering many ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. 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 Fidelity. It has amassed assets over $1.45 billion, making it one of the larger ETFs attempting to match the performance of the Financials - Broad segment of the equity market. FNCL seeks to match the performance of the MSCI USA IMI Financials Index before fees and expenses.

The MSCI USA IMI Financials Index represents the performance of the financial sector in the U.S. equity market.

Costs

When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.

Annual operating expenses for this ETF are 0.08%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 2.44%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. 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.

Looking at individual holdings, Berkshire Hathaway Inc Cl B Common Stock Usd.0033 (BRK.B) accounts for about 8.18% of total assets, followed by Jpmorgan Chase + Co Common Stock Usd1.0 (JPM) and Bank Of America Corp Common Stock Usd.01 (BAC).

The top 10 holdings account for about 37.15% of total assets under management.

Performance and Risk

The ETF has lost about -19.10% so far this year and is down about -13.01% in the last one year (as of 09/23/2022). In that past 52-week period, it has traded between $43.58 and $58.97.

The ETF has a beta of 1.10 and standard deviation of 31.28% for the trailing three-year period, making it a medium risk choice in the space. With about 390 holdings, it effectively diversifies company-specific risk.

Alternatives

Fidelity MSCI Financials Index ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, FNCL is an outstanding option for investors seeking exposure to the Financials ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

Vanguard Financials ETF (VFH) tracks MSCI US Investable Market Financials 25/50 Index and the Financial Select Sector SPDR ETF (XLF) tracks Financial Select Sector Index. Vanguard Financials ETF has $8.34 billion in assets, Financial Select Sector SPDR ETF has $28.81 billion. VFH has an expense ratio of 0.10% and XLF charges 0.10%.

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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Fidelity MSCI Financials Index ETF (FNCL): ETF Research Reports
 
Bank of America Corporation (BAC) : Free Stock Analysis Report
 
JPMorgan Chase & Co. (JPM) : Free Stock Analysis Report
 
Berkshire Hathaway Inc. (BRK.B) : Free Stock Analysis Report
 
Financial Select Sector SPDR ETF (XLF): ETF Research Reports
 
Vanguard Financials ETF (VFH): ETF Research Reports
 
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