Is a Financial Sector ETF a Better Buy Than Picking the Stocks Yourself?

Key Points Owning ETFs helps limit risk while still allowing investors to participate in the upside of a stock. The XLF ETF is a popular ETF for tracking the performance of the financial sector. XLF is up 6.1% so far in 2026. 10 stocks we like better than Select Sector SPDR Trust - State Street Financial Select Sector SPDR ETF › Exchange-traded funds (ETFs) help risk-averse investors tap into sector-specific opportunities without the risks associated with owning individual stocks. One of those is financials, which typically includes everything from banks to insurance companies. One of the most well-known ETFs in the financials sector is the State Street Financial Select Sector SPDR ETF (NYSEMKT: XLF) . XLF seeks to mimic the performance of the Financial Select Sector Index , which aims to represent the financial sector of the S&P 500 . But whether owning that ETF is better than an investor picking stocks on their own depends on a few factors. Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue » Image source: Getty Images. Working with a budget One of the benefits of owning an ETF is that it can often trade at a fraction of the price of its holdings. For example, JPMorgan Chase and Berkshire Hathaway are the top holdings of XLF. As of this writing, JPMorgan Chase trades for about $360 per share, while the Class B shares of Berkshire Hathaway trade for about $500. In comparison, XLF trades for around $58 per share. The ETF offers exposure to both JPMorgan and Berkshire, but investors don't have to shell out over $800 to buy shares of both. Instead, an investor could buy XLF for around $60 and still participate in the upside of both companies. Diversifying for less risk By holding multiple companies, the risk associated with an ETF is spread out, so a single stock can't impact its overall performance. Owning individual stocks can indeed offer greater price appreciation, but it also comes with more risk because performance depends entirely on a single stock. For example, the Berkshire Hathaway stock price is roughly flat for the year. In comparison, XLF is up 6% year to date. Not worrying about portfolio management One of the biggest benefits of ETFs is not having to manage the portfolio. Instead of tracking positions, looking for new opportunities, and deciding when to rebalance, the ETF essentially does all of that for an investor. When buying an individual stock is more ideal Buying an individual stock can be more ideal for investors comfortable with the risk and reward aspect of owning a single stock. Long-term investors are likely to experience more volatility and will have to deal with price drops at some point than those who own an ETF. But they believe the potential reward for that investment justifies taking on the risk. Also, buying an individual stock is better suited to an investor willing to study a company's ins and outs. Should you buy stock in Select Sector SPDR Trust - State Street Financial Select Sector SPDR ETF right now? Before you buy stock in Select Sector SPDR Trust - State Street Financial Select Sector SPDR ETF, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Select Sector SPDR Trust - State Street Financial Select Sector SPDR ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $432,621 !* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,335,314 !* Now, it’s worth noting Stock Advisor’s total average return is 973 % — a market-crushing outperformance compared to 213% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor , and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of August 20, 2026. JPMorgan Chase is an advertising partner of Motley Fool Money. Jack Delaney has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and JPMorgan Chase. The Motley Fool has a disclosure policy .

Owning ETFs helps limit risk while still allowing investors to participate in the upside of a stock.

The XLF ETF is a popular ETF for tracking the performance of the financial sector.

Exchange-traded funds (ETFs) help risk-averse investors tap into sector-specific opportunities without the risks associated with owning individual stocks. One of those is financials, which typically includes everything from banks to insurance companies.

One of the most well-known ETFs in the financials sector is the State Street Financial Select Sector SPDR ETF (NYSEMKT: XLF) . XLF seeks to mimic the performance of the Financial Select Sector Index , which aims to represent the financial sector of the S&P 500 . But whether owning that ETF is better than an investor picking stocks on their own depends on a few factors.

Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »

One of the benefits of owning an ETF is that it can often trade at a fraction of the price of its holdings. For example, JPMorgan Chase and Berkshire Hathaway are the top holdings of XLF. As of this writing, JPMorgan Chase trades for about $360 per share, while the Class B shares of Berkshire Hathaway trade for about $500. In comparison, XLF trades for around $58 per share.

The ETF offers exposure to both JPMorgan and Berkshire, but investors don't have to shell out over $800 to buy shares of both. Instead, an investor could buy XLF for around $60 and still participate in the upside of both companies.