Back to top

Image: Bigstock

Should You Invest in the iShares U.S. Broker-Dealers & Securities Exchanges ETF (IAI)?

Read MoreHide Full Article

Designed to provide broad exposure to the Financials - Brokers/ Capital markets segment of the equity market, the iShares U.S. Broker-Dealers & Securities Exchanges ETF (IAI - Free Report) is a passively managed exchange traded fund launched on 05/01/2006.

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.

Investor-friendly, sector ETFs provide many options to gain low risk and diversified exposure to a broad group of companies in particular sectors. Financials - Brokers/ Capital markets is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 8, placing it in top 50%.

Index Details

The fund is sponsored by Blackrock. It has amassed assets over $318.76 M, making it one of the average sized ETFs attempting to match the performance of the Financials - Brokers/ Capital markets segment of the equity market. IAI seeks to match the performance of the Dow Jones U.S. Select Investment Services Index before fees and expenses.

The Dow Jones U.S. Select Investment Services Index measures the performance of the investment services sector of the U.S. equity market.

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 0.43%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 1.39%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, 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, Goldman Sachs Group Inc (GS - Free Report) accounts for about 10.16% of total assets, followed by Morgan Stanley (MS - Free Report) and Charles Schwab Corp (SCHW - Free Report) .

The top 10 holdings account for about 66.46% of total assets under management.

Performance and Risk

Year-to-date, the iShares U.S. Broker-Dealers & Securities Exchanges ETF has gained about 1.16% so far, and is up roughly 14.92% over the last 12 months (as of 09/27/2018). IAI has traded between $56.93 and $70.28 in this past 52-week period.

The ETF has a beta of 1.20 and standard deviation of 18.78% for the trailing three-year period, making it a high risk choice in the space. With about 29 holdings, it has more concentrated exposure than peers.

Alternatives

IShares U.S. Broker-Dealers & Securities Exchanges 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, IAI is a great 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.

SPDR S&P Capital Markets ETF (KCE - Free Report) tracks S&P Capital Markets Select Industry Index. The fund has $116.44 M in assets. KCE has an expense ratio of 0.35%.

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.