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

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

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

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 5, placing it in top 31%.

Index Details

The fund is sponsored by Blackrock. It has amassed assets over $888.29 million, 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

Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.

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 1.01%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. 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, Morgan Stanley (MS) accounts for about 21.16% of total assets, followed by Goldman Sachs Group Inc (GS) and Intercontinental Exchange Inc (ICE).

The top 10 holdings account for about 77.53% of total assets under management.

Performance and Risk

So far this year, IAI has added roughly 31.11%, and it’s up approximately 70.08% in the last one year (as of 08/05/2021). During this past 52-week period, the fund has traded between $59.20 and $103.66.

The ETF has a beta of 1.08 and standard deviation of 27.97% 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. BrokerDealers & 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 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.

SPDR S&P Capital Markets ETF (KCE) tracks S&P Capital Markets Select Industry Index. The fund has $152.79 million 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. BrokerDealers & Securities Exchanges ETF (IAI): ETF Research Reports
 
The Goldman Sachs Group, Inc. (GS) : Free Stock Analysis Report
 
Morgan Stanley (MS) : Free Stock Analysis Report
 
Intercontinental Exchange Inc. (ICE) : Free Stock Analysis Report
 
SPDR S&P Capital Markets ETF (KCE): ETF Research Reports
 
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