VFH vs. XLF: Which Financial ETF Is the Better Buy?

XLF holds significantly fewer stocks than VFH, and is more concentrated in its top positions.

VFH offers broader exposure to the financial sector and charges a slightly higher expense ratio than XLF.

Both funds have have delivered similar total returns over the last five years.

The State Street Financial Select Sector SPDR ETF (NYSEMKT:XLF) and the Vanguard Financials ETF (NYSEMKT:VFH) both focus on financials, but VFH provides significantly broader diversification.

Investors looking for exposure to the financial sector often choose between these two funds. Both ETFs hold major banks, insurers, and payment networks -- but they differ in portfolio depth and concentration.

Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-year return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

XLF is slightly cheaper, with an expense ratio of 0.08% compared with VFH’s 0.09%. However, VFH offers a higher dividend yield of 1.67% -- a quarter of a percentage point higher than XLF’s 1.42%.

Launched in 1998, XLF tracks the Financial Select Sector Index, which holds only the financial companies already inside the S&P 500. The fund holds 76 stocks, including top holdings JPMorgan Chase (NYSE:JPM) at 11.7%, Berkshire Hathaway (NYSE:BRKB) at 11.7%, and Visa (NYSE:V) at 7.6%.