A Tale of Two Financial ETFs: How Vanguard Financials ETF (VFH) and First Trust Nasdaq Bank ETF (FTXO) Compare
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Choosing Between VFH and FTXO: What SA Investors Should Know
Vanguard’s Financials ETF offers broad, cost-efficient exposure while First Trust’s Nasdaq Bank ETF appeals to income-focused, niche investors.
South African investors often look for ways to diversify financial sector exposure while managing costs and risks. Vanguard’s Financials ETF (VFH) stands out with its broad reach across 400-plus financial firms and a rock-bottom expense ratio of 0.09%. It delivered a healthy 52% total return over five years with less volatility. That’s a compelling package for those wanting steady growth without the hassle of picking individual names. By contrast, First Trust’s Nasdaq Bank ETF (FTXO) zooms in on US banks, offering a higher dividend yield and better short-term returns but at a much steeper cost (0.60%) and with higher price swings. For South Africans watching the rand (USD/ZAR), VFH’s wider spread means less shock to your investment if a single US bank stumbles. Watch out though, as a rapid US rate shift could narrow the yield gap and shake up both ETFs. Until then, VFH suits most local investors better. this is just our opinion and not financial advice
Buy VFH for diversified, low-cost exposure to global financials, especially if you’re mindful of rand volatility. Consider FTXO only if you want focused US bank dividends and can tolerate volatility and higher fees.
- VFH
- FTXO
- USD/ZAR
- US interest rate volatility impacting bank sector returns
- Rand fluctuations altering foreign investment value
6/10
Vanguard Financials ETF (VFH) offers broader financial sector exposure with a significantly lower expense ratio of 0.09% and stronger 5-year performance, while First Trust Nasdaq Bank ETF (FTXO) provides concentrated banking exposure with higher dividend yield but charges 0.60% in fees and exhibits greater volatility. VFH is recommended for most investors seeking diversification and cost efficiency.
Our take is based on reporting first published by The Motley Fool.