What is the best bank ETF to buy?

The best bank ETF depends on your risk tolerance and investment goals. There are some low-cost broad financial sector ETFs, like the SPDR Financials ETF, but there are others that focus solely on banks.

Does Vanguard have a banking ETF?

Vanguard offers the Vanguard Financials ETF (NYSEMKT: VFH), which tracks the financial sector. While this isn't a pure-play bank ETF (it owns insurance stocks and payment processing companies, for example), banks make up the bulk of the ETF's assets.

How are bank ETFs taxed?

There are two types of taxes that most investors need to be aware of when it comes to ETFs: capital gains and dividends. If you sell an ETF at a profit, capital gains taxes can be assessed (either long term or short term). When your bank ETFs pay dividends, those can also be taxable. However, you don't need to worry about these types of taxes if you hold your ETFs in retirement accounts like IRAs.

Do bank ETFs pay dividends?

Yes, most bank ETFs pay dividends. ETFs, in general, pass the dividends paid by their component stocks along to shareholders.

Are bank ETFs suitable for long-term investing?

Bank ETFs can be great ways to invest for the long term. The banking industry can be a highly cyclical one over short periods, but it can be a great way to build wealth in your stock portfolio over long periods of time.

Best Bank ETFs for 2026 and How to Invest

By Matthew Frankel, CFP – Updated Aug 14, 2026 at 1:22 PM EST | Fact-checked by Frank Bass

Key Points

Bank ETFs offer diversified exposure to the banking sector, reducing individual stock risk.
Top bank ETFs like the Financial Select Sector SPDR have low expense ratios, enhancing returns.
Investing in bank ETFs is straightforward via brokerage accounts and can suit long-term goals.

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NYSEMKT: XLF

Select Sector SPDR Trust - State Street Financial Select Sector SPDR ETF

Today's Change

(0.89%) $0.48

Current Price

$54.23

Key Data Points

AUM

$51B

Dividend Yield

1.52%

Expense Ratio

0.08%

Top Holdings

BRK-B

12.45%

JPM

11.57%

8.38%

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Like most index funds, this is a market-cap-weighted fund, meaning larger companies carry more weight in the index. It's important to note that while banking is a large component of the ETF's holdings, the financial sector also includes insurance companies, financial services firms, and other businesses.

For example, the top holding is Warren Buffett's Berkshire Hathaway (BRK.A +0.92%)(BRK.B +0.95%), which is technically classified as an insurance company. Other top holdings are JPMorgan Chase (JPM +0.56%), Visa (V +0.81%), Mastercard (MA +0.82%), Bank of America (BAC +0.17%), and Wells Fargo (WFC +2.21%).

The Financial Select Sector SPDR fund is also one of the lowest-cost ways to invest in the financial sector, with a 0.08% gross expense ratio. This represents a remarkably low investment cost, translating to just $0.80 in annual expenses per $1,000 invested.

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2. SPDR S&P Bank ETF

If you want more of a pure-play bank ETF, the SPDR S&P Bank ETF (KBE +1.05%) could be what you're looking for. It is a relatively small ETF, with about $1.4 billion in assets under management, and is a bit more expensive than the overall financial sector ETF discussed earlier.

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NYSEMKT: KBE

SPDR Series Trust - State Street SPDR S&P Bank ETF

Today's Change

(1.05%) $0.66

Current Price

$63.55

Key Data Points

AUM

$1.5B

Dividend Yield

2.31%

Expense Ratio

0.35%

Top Holdings

EQH

1.02%

CRBG

1.02%

CBC

0.99%

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The fund's 0.35% expense ratio is comparable to that of other specialized index funds. (As a general rule, the more specialized an index fund is, the more you can expect to pay in investment fees.)

The SPDR S&P Bank ETF invests in an index that comprises large money center banks, regional banks, diversified financial services providers, and other relevant entities. It invests in 103 different stocks.

In short, this bank ETF aims to provide fairly equal exposure to banks of all sizes and types. None of the ETF's holdings make up more than 1.11% of its total assets. Top holdings include regional and smaller banks, as well as major banks such as JPMorgan Chase.

3. SPDR S&P Regional Banking ETF

If you see value opportunities in regional banking but don't want to put your money into any single regional bank, the SPDR S&P Regional Banking ETF (KRE +1.02%) could be a smart way to get diversified exposure. Like the previous ETF, the SPDR S&P Regional Banking ETF has a moderate 0.35% expense ratio.

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NYSEMKT: KRE

SPDR Series Trust - State Street SPDR S&P Regional Banking ETF

Today's Change

(1.02%) $0.70

Current Price

$69.59

Key Data Points

AUM

$3.6B

Dividend Yield

2.32%

Expense Ratio

0.35%

Top Holdings

EWBC

1.15%

UBSI

1.14%

HWC

1.13%

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This fund aims to track an index of regional bank stocks and has 161 positions. This fund is also a modified equal-weight index, meaning it doesn't have excessive exposure to any individual regional bank. To put it another way, if one of the banks held by the fund were to fail, your exposure would be rather limited. Specifically, the ETF's five largest positions combine for 7.3% of its total assets.

4. iShares U.S. Financials ETF

The iShares U.S. Financials ETF (IYF +0.94%) tracks a financial sector index with a somewhat different composition than the other financial sector ETFs on the list. Specifically, you'll find more banks and banking-related businesses among its top holdings and fewer financial technology companies (for example, no Visa and Mastercard).

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NYSEMKT: IYF

iShares Trust - iShares U.s. Financials ETF

Today's Change

(0.94%) $1.19

Current Price

$127.32

Key Data Points

AUM

$3.8B

Dividend Yield

1.53%

Expense Ratio

0.37%

Top Holdings

BRK-B

11.99%

JPM

11.20%

BAC

4.11%

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The ETF has a 0.38% expense ratio, which should certainly be taken into account. Top holdings include Berkshire Hathaway, JPMorgan Chase, Bank of America, Wells Fargo, and Goldman Sachs (GS -0.52%).

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5. Invesco KBW Bank ETF

For investors seeking a pure-play banking ETF with a heavier concentration in the largest U.S. financial institutions, the Invesco KBW Bank ETF (KBWB +0.75%) warrants a closer examination. The fund tracks a bank stock index and owns just 29 total positions. This is a market-weighted fund, so certain large bank stocks comprise a larger proportion of the fund's assets.

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NASDAQ: KBWB

Invesco Exchange-Traded Fund Trust II - Invesco Kbw Bank ETF

Today's Change

(0.75%) $0.65

Current Price

$87.24

Key Data Points

AUM

$6.2B

Dividend Yield

2.14%

Expense Ratio

0.35%

Top Holdings

WFC

8.15%

JPM

8.12%

7.80%

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The top five holdings of the ETF are (in order) Bank of America, JPMorgan Chase, Wells Fargo, Morgan Stanley, and Goldman Sachs, which combine to account for about 40% of the total assets.

The Invesco KBW Bank ETF has a 0.35% expense ratio, which is typical for a subsector-type ETF like this one. If your goal is to simply invest in a portfolio representative of the U.S. commercial banking industry, this could be the best ETF choice for you.

How to buy bank ETFs

The process of investing in bank ETFs is pretty straightforward:

Open your brokerage account: Log in to your brokerage account where you handle your investments. If you don't have one yet, take a look at our favorite brokers and trading platforms to find the right one for you.
Search for the ETF: Enter the ticker or company name into the search bar to bring up the stock's trading page.
Determine the number of shares to purchase: Consider your investment objectives and the percentage of your portfolio you wish to allocate to this ETF.
Select order type: Choose between a market order to buy at the current price or a limit order to specify the maximum price you're willing to pay.
Submit your order: Confirm the details and submit your buy order.
Review your purchase: Check your portfolio to ensure your order was filled as expected and adjust your investment strategy accordingly.

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Benefits and risks of investing in bank ETFs

Like any investment, there are pros and cons to investing in bank ETFs. Here are some key considerations for investing.

Benefits of bank ETFs

Diversification: Any of the bank ETFs on this list will spread your money across many bank stocks. So, if one bank performs particularly poorly, it won't be devastating.
Lots of choices: You can focus on the big banks, regional banks, a broad spectrum of banks, or the entire financial sector.
Easy to manage: With ETFs, you don't have to regularly do stock research, rebalance your portfolio, or do any other homework.
Income: Many bank stocks pay dividends, and bank ETFs pass these through to investors.

Risks of bank ETFs

Cyclicality: Bank stocks can be economically sensitive. During recessions, loan demand declines, and more people struggle to repay their debts.
Fees: Some bank ETFs have very low fees, but they should still be considered. After all, if you invest directly in bank stocks, you don't have any management expenses.

Methodology: How these ETFs were chosen

My goal was to create a list of ways to gain banking exposure, including broad financial sector exposure, weighted bank index funds, funds focused on regional banks, and more. In other words, I wanted to present several ways to use ETFs to invest in banking, rather than simply listing the five largest bank ETFs.

I started with a much larger list and examined the latest fact sheets and information for each one, including expense ratios, portfolio concentration, number of holdings, assets under management, and several other factors. From there, I selected the top 1-2 funds in each category I wished to include, and the list you just read was formed.

The bottom line

As you've seen, there are several excellent bank ETFs, and this wasn't an exhaustive list -- there are many more. The best bank ETF for you depends on your investment objectives and goals.

If you simply want financial sector exposure in your portfolio, one of the broad ETFs is generally the best (and lowest-fee) way to go. But if you want to invest for a more specific purpose -- for example, let's say you think falling interest rates will be especially good for regional banks -- a more specialized bank ETF could be a better option, even if it has a somewhat higher fee structure.

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Bank ETF FAQ

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About the Author

Matt Frankel, CFP®, is a contributing Motley Fool stock market analyst specializing in the real estate and financial sectors. Prior to The Motley Fool, Matt taught high school and college mathematics. He holds a bachelor’s degree in physics from the University of South Carolina, a master’s degree in mathematics from Nova Southeastern University, and a graduate certificate in financial planning from Florida State University. He won a SABEW award for coverage of the 2017 Tax Cuts and Jobs Act. He is also regularly interviewed by Cheddar, Globe St, The National Desk, and other TV networks and publications for his real estate, financial, stock market, and investing expertise.

TMFMattFrankel

@MattFrankelUSC

JPMorgan Chase is an advertising partner of Motley Fool Money. Bank of America is an advertising partner of Motley Fool Money. Wells Fargo is an advertising partner of Motley Fool Money. Matt Frankel, CFP has positions in Bank of America and Berkshire Hathaway. The Motley Fool has positions in and recommends Berkshire Hathaway, Goldman Sachs Group, JPMorgan Chase, Mastercard, Truist Financial, and Visa. The Motley Fool has a disclosure policy.

Best Bank ETFs for 2026 and How to Invest

Key Points

Key Data Points

2. SPDR S&P Bank ETF

Key Data Points

3. SPDR S&P Regional Banking ETF

Key Data Points

4. iShares U.S. Financials ETF

Key Data Points

5. Invesco KBW Bank ETF

Key Data Points

How to buy bank ETFs

Benefits and risks of investing in bank ETFs

Benefits of bank ETFs

Risks of bank ETFs

Methodology: How these ETFs were chosen

The bottom line

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Bank ETF FAQ

What is the best bank ETF to buy?

Does Vanguard have a banking ETF?

How are bank ETFs taxed?

Do bank ETFs pay dividends?

Are bank ETFs suitable for long-term investing?

How to buy bank ETFs

Benefits and risks of investing in bank ETFs

Benefits of bank ETFs

Risks of bank ETFs

Methodology: How these ETFs were chosen

The bottom line

Related investing topics

Five top bank ETFs for 2026

1. Financial Select Sector SPDR ETF

3. SPDR S&P Regional Banking ETF

Key Data Points

Key Data Points

Key Data Points

Key Data Points

Key Data Points

5. Invesco KBW Bank ETF

2. SPDR S&P Bank ETF

4. iShares U.S. Financials ETF