VFH vs. KRE: Which Financial Sector ETF Is the Better Buy for Investors?
Key Points
The Vanguard Financials ETF (VFH) charges a lower expense ratio than the State Street SPDR S&P Regional Banking ETF (KRE).
KRE offers concentrated exposure to regional banks, while VFH spans the entire financial sector -- from megabanks to payment processors to insurers.
VFH has delivered better returns over the past five years, with a significantly smaller maximum drawdown than KRE.
The Vanguard Financials ETF (NYSEMKT:VFH) gives investors diversified, low-cost exposure to the broad financial services sector, while the State Street SPDR S&P Regional Banking ETF (NYSEMKT:KRE) makes a targeted bet on the regional banking industry.
These two funds provide very different ways to invest in the financial sector. VFH's roster includes global banking giants and payment networks, while KRE isolates smaller, domestic lenders. Comparing their portfolios and cost structures can help investors decide which approach best fits their long-term strategy.
Snapshot (cost & size)
| Metric | KRE | VFH |
|---|---|---|
| Issuer | State Street | Vanguard |
| Expense ratio | 0.35% | 0.09% |
| 1-year return (as of July 24, 2026) | 24.74% | 8.41% |
| Dividend yield | 2.14% | 1.77% |
| Beta | 1.18 | 0.83 |
| AUM | $4.7 billion | $13.8 billion |
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.
VFH's 0.09% expense ratio is notably cheaper than KRE's 0.35%. KRE, however, offers a higher dividend yield of 2.14% compared to VFH’s 1.77%.
Performance & risk comparison
| Metric | KRE | VFH |
|---|---|---|
| Max drawdown (5 yr) | (52.71%) | (25.67%) |
| Growth of $1,000 over 5 years (total return) | $1,413 | $1,738 |
Over the last five years, VFH has outperformed KRE, while experiencing only about half of KRE's maximum drawdown. That combination -- stronger long-term returns with a smoother ride -- reflects the steadying effect of VFH's broader diversification. Still, KRE has had the edge more recently, a reminder that concentrated funds can outperform during periods when their specific sector or niche is in favor, even if that comes with sharper swings over a full market cycle.
What's inside
Launched in 2004, VFH tracks the financial services industry using a passive approach and holds 428 stocks. Its largest positions include JPMorgan Chase & Co (NYSE:JPM) at 9.2%, Berkshire Hathaway Inc (NYSE:BRKB) at 7.8%, and Mastercard Inc (NYSE:MA) at 4.7%.
KRE focuses exclusively on the regional banking sector, using a representative sampling technique to track 159 holdings. Its top positions include Pinnacle Financial Partners (NYSE:PNFP) at 1.4%, UMB Financial (NASDAQ:UMBF) at 1.41%, and Atlantic Union Bankshares (NYSE:AUB) at 1.40%. KRE was launched in 2006.
For more guidance on ETF investing, check out the full guide at this link.
What this means for investors
This comparison captures a classic trade-off in sector investing: breadth versus concentration.
VFH's diversification across banking, insurance, and payments has historically helped cushion it during downturns -- hence its smaller five-year maximum drawdown -- while still capturing upside from the financial sector's biggest, most stable players.
KRE, by contrast, is a purer play on regional banks, a corner of the market that's historically more sensitive to interest-rate swings, credit conditions, and localized economic stress. That sensitivity plays out in both directions, though: it's part of why KRE has outperformed lately, and also why it tends to fall harder when sentiment turns.
For investors who want exposure to the financial sector without betting heavily on any single subsector, VFH's broader mix -- including global banks and payment processors alongside traditional lenders -- offers a smoother, lower-cost way to stay invested. Those who have a specific view that regional banks are poised for a rebound, or who want a more concentrated bet on smaller banks for the long term, may find KRE more appealing despite its higher fees and historically bumpier ride. As always, the right choice often comes down to how much volatility an investor is willing to stomach in pursuit of sector-specific upside.
JPMorgan Chase is an advertising partner of Motley Fool Money. Andy Gould has positions in Berkshire Hathaway and Mastercard. The Motley Fool has positions in and recommends Berkshire Hathaway, JPMorgan Chase, and Mastercard. The Motley Fool has a disclosure policy.