Despite the stunning fall of Bear Stearns, banking and financial ETFs rebounded a bit from their earlier-in-the-year market lows. They are, however, still lagging way behind the Dow Jones and S&P 500 indexes.
The most heavily traded financial ETF is the Financial Sector SPDRs (XLF), which tracks financial stocks that are part of the S&P 500.
Bear Stearns is one of the 92 holdings in XLF. During the week when its stock (BSC) fell by nearly 50 percent in March, XLF actually closed flat. Helping XLF was the performance of other leading financials such as Goldman Sachs, JP Morgan Chase, and Wells Fargo.
The KBW Bank ETF (KBE) follows a narrow index of 24 banks and has declined by almost 10 percent since the beginning of the year. Top holdings include some of the same companies as XLF, but exclude other financials like insurance companies and investment brokers.
Financial advisors and investors using ETFs, even ones limited to focused industry sectors, have benefited because of diversification and transparency.