FNCL vs. KBWB: Broad Financial Exposure vs. a Concentrated Bank ETF -- Which Is the Better Buy?

Fidelity MSCI Financials Index ETF (FNCL) offers a significantly lower expense ratio than Invesco KBW Bank ETF (KBWB).

KBWB provides a concentrated portfolio of 26 bank stocks while FNCL holds 404 diversified financial companies.

FNCL has a significantly smaller maximum drawdown than KBWB over the past five years.

The Fidelity MSCI Financials Index ETF (NYSEMKT:FNCL) provides broad, low-cost exposure to the entire financial sector, while the Invesco KBW Bank ETF (NASDAQ:KBWB) offers a concentrated strategy focused strictly on the banking industry.

Both funds provide targeted exposure to the financial services sector. The Fidelity fund seeks to replicate the results of a broad financials index, casting a wide net across the industry. The Invesco fund tracks a more specialized bank index, resulting in a narrower fund that is historically more volatile.

Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-year return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

At a 0.08% expense ratio, FNCL is significantly cheaper for long-term holders than KBWB, which charges 0.35%. This means an investor pays roughly $8 annually for every $10,000 invested in the Fidelity fund, compared to $35 in the Invesco fund. On the other hand, KBWB pays a higher dividend yield than FNCL.

The Fidelity MSCI Financials Index ETF (NYSEMKT:FNCL) provides exposure to nearly 400 holdings across the financial sector. Its largest positions include JPMorgan Chase & Co. (NYSE:JPM) at 9.8%, Berkshire Hathaway (NYSE:BRKB) at 7.8%, and Visa (NYSE:V) at 6.6%. Launched in 2013, the fund pays a 1.67% dividend yield.