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

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

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they 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 - Brokers/ Capital markets is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 9, placing it in bottom 44%.

Index Details

The fund is sponsored by Blackrock. It has amassed assets over $238.43 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

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 0.42%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 1.62%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. 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, Cme Group Inc Class A (CME) accounts for about 19.65% of total assets, followed by Goldman Sachs Group Inc (GS) and Morgan Stanley (MS).

The top 10 holdings account for about 78.12% of total assets under management.

Performance and Risk

So far this year, IAI has added roughly 16.44%, and is up about 7.53% in the last one year (as of 11/01/2019). During this past 52-week period, the fund has traded between $52.67 and $66.75.

The ETF has a beta of 1.05 and standard deviation of 16.89% for the trailing three-year period, making it a high risk choice in the space. With about 30 holdings, it has more concentrated exposure than peers.

Alternatives

IShares U.S. Broker-Dealers & Securities Exchanges ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, IAI is a sufficient 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.

SPDR S&P Capital Markets ETF (KCE) tracks S&P Capital Markets Select Industry Index. The fund has $36.16 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.

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iShares U.S. Broker-Dealers & Securities Exchanges ETF (IAI): ETF Research Reports
 
Morgan Stanley (MS) : Free Stock Analysis Report
 
The Goldman Sachs Group, Inc. (GS) : Free Stock Analysis Report
 
SPDR S&P Capital Markets ETF (KCE): ETF Research Reports
 
CME Group Inc. (CME) : Free Stock Analysis Report
 
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