XLF vs VFH: Financial Sector ETF Comparison

XLF vs VFH: Which Financial Sector ETF?

Comparisons6 min readUpdated March 17, 2026

Key Takeaways

✓XLF tracks the S&P Financial Select Sector (~70 stocks); VFH tracks the broader MSCI US IMI Financials (~400 stocks).
✓XLF charges 0.09%; VFH charges 0.10% — nearly identical fees.
✓VFH's broader index captures mid and small-cap financials that XLF misses.
✓Both are heavily weighted toward large banks, insurance companies, and financial services firms.

XLF and VFH provide financial sector exposure with slightly different approaches. Both hold the same large-cap financial stocks at their core, but diverge in how deeply they reach into the financial sector.

Index Breadth

XLF holds approximately 70 stocks from the S&P 500's financial sector — strictly large-cap companies. VFH holds roughly 400 stocks from the MSCI US IMI Financials Index, spanning large, mid, and small-cap financials. VFH includes regional banks, specialty insurers, and financial technology companies that XLF misses entirely.

Compare the full holdings at XLF vs VFH comparison page.

Top Holdings

Both are dominated by the same names: Berkshire Hathaway, JPMorgan Chase, Visa, Mastercard, and Bank of America. The top 10 holdings in both funds are nearly identical and represent a large share of each fund's total assets. The difference emerges below the top 20, where VFH includes hundreds of smaller companies that XLF excludes.

Fees and Liquidity

XLF charges 0.09% and VFH charges 0.10% — essentially identical. XLF has significantly higher trading volume and options market activity, making it the preferred choice for traders and options strategies. VFH's lower volume is still adequate for most retail investors.

Which Is Better?

VFH for broader financial sector coverage including small and mid-cap companies that may offer higher growth. XLF for large-cap financial exposure with superior trading liquidity and options availability. Both are solid choices — the difference in long-term performance will be modest. Learn more about sector investing at our education center.

Frequently Asked Questions

Which provides better diversification?

VFH holds roughly 400 stocks versus XLF's 70, providing better diversification within the financial sector. VFH's inclusion of small and mid-cap financial companies gives exposure to regional banks, specialty insurers, and fintech companies that XLF excludes.

How do financial ETFs perform when rates rise?

Financial sector ETFs generally benefit from rising interest rates because banks earn more on their lending. The net interest margin — the spread between what banks pay depositors and charge borrowers — widens when rates rise. However, sharply rising rates can also increase loan defaults, partially offsetting the benefit.

Is Berkshire Hathaway in these ETFs?

Yes, Berkshire Hathaway is typically the largest holding in both XLF and VFH, representing 10-15% of each fund. This creates significant exposure to one company's performance. If you already own Berkshire separately, be aware of this overlap.