List of Financial Index Funds

Financial funds are Exchange-Traded Funds -- ETFs -- or mutual funds that own shares of banks, insurance companies and stock brokerage companies. An index fund holds the same stocks as a specific market index, in this case, financial stocks. All ETFs are index funds, but mutual funds can be either index funds or actively managed.

Financial Select Sector SPDR Fund

The Financial Select Sector SPDR Fund, symbol XLF, is the largest financial sector ETF with over $6 billion in assets. The Financial Select Sector SPDR fund holds the stocks that make up the financial sector of the S&P 500 stock index. The top five holdings of the fund are JP Morgan Chase, Wells Fargo, Berkshire Hathaway, Bank of America and Citigroup. In November 2010, these five stocks made up about 40 percent of the fund's total value. An alternate choice would be the iShares Dow Jones U.S. Financial Sector, symbol IYF. This fund holds a similar portfolio, with the top five from XLF in the top six of the iShares fund plus Goldman Sachs.

The iShares S&P U.S. Preferred Stock ETF, symbol PFF, is the second largest fund in the financial sector with just under $6 billion in assets. The fund holds preferred stock shares to match the S&P U.S. Preferred Stock Index. Investing in preferred stocks is an income option and in November 2010, the fund had a dividend yield of 7.3 percent. The preferred stock index is not strictly preferred shares from financial companies, but they are the primary issuers of preferred shares and nine of the top 10 fund holdings are from financial companies. An alternate choice is PowerShares Financial Preferred Portfolio, symbol PGF which only holds preferred shares of financial companies and was yielding 7.1 percent.

Mutual fund investors looking for an index fund in the financial sector are limited to the Vanguard Financials Index Fund Admiral Shares. In November 2010, the fund has assets of approximately $500 million and held shares of almost 500 different financial companies. The top holdings are the same stocks as the financial ETFs listed above. The Admiral shares class of mutual funds from Vanguard have a minimum initial investment amount of $100,000. Shares of this fund are also available in ETF form as the Vanguard Financials ETF, symbol VFH.