On February 22, Citrini Research — an independent financial research firm on the substack — posted on X and released a report titled, “The Global Intelligence Crisis of 2028.”
The report predicts incredible improvements in artificial intelligence (AI) capabilities and efficiency, at the expense of double unemployment, as AI destroys white-collar jobs. Under these hypothetical conditions, the report argues that the consumer-driven economy would be severely affected, with spillover effects into the housing market and other core pockets of American household wealth.
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As the report’s forecast was bleak, there was an even more crushing impact on the financial sector, which fell 3.3% on February 23, leading to heavy losses by major banks and payment processors. In a meeting, visa It fell 4.3 percent MasterCard 5.3% decreased, and American Express — which caters to affluent consumers likely to be most affected by the “global intelligence crisis” — fell 7%.
These are big moves from high-margin, stable companies — especially coming in the wake of a report by an independent research firm. Here’s a simple and straightforward way to buy the sector through an exchange-traded fund (ETF).
Image source: Getty Images.
of the Vanguard Financial ETF(NYSEMKT: VFH ) A relatively low expense ratio of just 0.09%, or $9 for every $10,000 invested. Through a single ticker, an investor can access 418 stocks. But the bulk of the portfolio is concentrated in mega-cap industry leaders — like banks JPMorgan Chase, Bank of America, Wells Fargoand Citigroup; Berkshire Hathaway; Payment processors MasterCard, Visa, and American Express; and investment banks Goldman Sachs and Morgan Stanley.
The financial sector is one of the most underweight sectors of the stock market, making the Vanguard Financials ETF particularly attractive. For context, the tech sector dominates Nvidia, Appland Microsoft. Amazon and Tesla By far the biggest consumer is discretionary stocks. the alphabet and Meta platforms The balance of the telecommunications sector is falling. ExxonMobil and Chevron There are large reserves of energy. The list goes on.
As big as JPMorgan Chase and Berkshire Hathaway are, there are enough multi-hundred billion dollar financial firms to make the sector more balanced. There are also many industries that investors may never encounter unless they invest in an ETF, such as insurance, regional banks, financial exchanges, etc.
Even large regional banks viz PNC Financial Services and US Bancorp It has a market capitalization of just under $90 billion, which isn’t even big enough to crack the top 20 holdings in the Vanguard Financial ETF. But the regional bank industry’s combined weighting is 7% of the ETF, which is almost as large as Berkshire Hathaway’s weighting in the fund.
In sum, replicating the diversification of the financial sector without ETFs would be tedious and complicated.
Another attractive quality of the financial sector is the balance of growth potential, earnings and value.
The sector is cyclical and performs well during periods of economic expansion. But it also offers a relatively cheap valuation compared to the broader market, with the Vanguard Financials ETF having a price-to-earnings (P/E) ratio of just 16.4 and a dividend yield of 1.6%. For context, d Vanguard S&P 500 ETFwhich reflects the performance of the index, has a P/E of 27.5 and a yield of 1.1%.
Add it all up, and the Vanguard Financial ETF is a simple yet highly effective way to gain fundamental exposure to the financial sector while also unlocking diversification to help protect against downside risk.
Before you buy stock in Vanguard World Fund – Vanguard Financials ETF, consider this:
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Citigroup is an advertising partner of Motley Fool Money. Wells Fargo is an advertising partner of Motley Fool Money. American Express is an advertising partner of Motley Fool Money. Bank of America is an advertising partner of Motley Fool Money. JPMorgan Chase is an advertising partner of Motley Fool Money. Daniel Folber holds positions in Nvidia. The Motley Fool owns and recommends positions in Alphabet, Amazon, Apple, Berkshire Hathaway, Chevron, Goldman Sachs Group, JPMorgan Chase, MasterCard, MetaPlatforms, Microsoft, Nvidia, Tesla, US Bancorp, Vanguard S&P 500 ETF, and Visa. Motley Fool has a disclosure policy.
Financial reserves are eliminated. Consider buying this low-cost Vanguard ETF. Originally published by Motley Fool
