Invesco KBW Bank ETF Wins on Yield and 1-Year Return. Is It a Better Financials Fund Than IYF?

The Invesco KBW Bank ETF (NASDAQ:KBWB) offers concentrated exposure to the banking industry with a higher yield, while the iShares U.S. Financials ETF (NYSEMKT:IYF) provides a more diversified financial sector portfolio with lower historical volatility.

Both funds serve as primary vehicles for financial sector exposure but differ in scope. The Invesco fund targets 26 specific banking stocks, while the iShares ETF casts a wider net across 141 holdings, including insurance and investment firms. This comparison explores which strategy better suits an investor's risk tolerance.

Snapshot (cost & size)

Metric	KBWB	IYF
Issuer	Invesco	iShares
Share price (as of 8/27/26)	$95.98	$136.88
Expense ratio	0.35%	0.37%
1-yr return (as of 8/27/26)	26.7%	10.8%
Dividend yield	1.9%	1.4%
Beta	1.2	0.8
AUM	$6.8 billion	$4.3 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-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

KBWB is the more affordable option with a 0.35% expense ratio compared to 0.38% for IYF. Furthermore, the Invesco fund provides a higher payout, currently offering a yield 0.53 percentage points above its iShares counterpart.

Performance & risk comparison

Metric	KBWB	IYF
Max drawdown (5 yr)	(49.3%)	(25.1%)
Growth of $1,000 over 5 years (total return)	$1,628	$1,737

iShares U.S. Financials ETF tracks a broad index of financial firms, with its portfolio weighted toward financial services at 99%. With more than 140 holdings, its largest positions include JPMorgan Chase & Co at 11.2%, Berkshire Hathaway at 11.1%, and Bank of America at 4.34%. It was launched in 2000. iShares U.S. Financials ETF has paid $1.92 per share over the trailing 12 months, which on its recent ~$136.88 share price works out to a 1.4% yield.

Invesco KBW Bank ETF focuses purely on banks, with financial services representing 100% of the basket. Its 26 holdings are more concentrated; top positions include Bank of America at 8.7%, JPMorgan Chase & Co at 8.6%, and Wells Fargo & Co at 8.1%. The fund was launched in 2011. Invesco KBW Bank ETF has paid $1.86 per share over the trailing 12 months, which on its recent ~$95.98 share price works out to a 1.9% yield.

For more guidance on ETF investing, check out the full guide at this link.

Which looks like the better buy

Choosing between KBWB and IYF presents a classic investing dilemma. KBWB's concentrated focus on just 26 banks has yielded a higher one-year return and generates more dividend revenue than IYF's broader approach. But it has also made the bank ETF more volatile, with a larger maximum drawdown over five years.

IYF's structure, in contrast, provides stability through greater diversification, as its more than 140 holdings target both banks and other financial institutions, including conglomerate Berkshire Hathaway, a market stalwart that accounts for more than 10% of its portfolio. This structure significantly reduces risk, as seen in IYF's maximum five-year drawdown, but also may limit near-term upside as well as overall dividend returns.

Investing in banks has its upsides, including reliable dividend income and exposure to economic growth. But banks are also exposed to interest rate fluctuations, cyclicality, and loan losses. The wider swath of financial companies captured by IYF is also exposed to these risks to some degree. When choosing either of these funds, be sure they align with your long-term financial goals, and take a minute to check your exposure to these companies via holdings in other popular index funds, like those that track the S&P 500.

Wells Fargo is an advertising partner of Motley Fool Money. JPMorgan Chase is an advertising partner of Motley Fool Money. Bank of America is an advertising partner of Motley Fool Money. Sarah Sidlow has positions in Bank of America and Berkshire Hathaway. The Motley Fool has positions in and recommends Berkshire Hathaway and JPMorgan Chase. The Motley Fool has a disclosure policy.