IYF vs EUFN: U.S. and European Financial Giants Face Off in this ETF Comparison |

Comparing iShares U.S. Financials ETF (IYF -0.71%) and iShares MSCI Europe Financials ETF (EUFN -0.59%) reveals a choice between broad domestic sector coverage and a higher-yielding, though more volatile, European basket.

Investors often turn to the financial sector for reliable dividends and cyclical growth. While both funds target financial services, the iShares financials fund focuses on the massive domestic market, whereas the iShares Europe financials fund provides targeted access to banks and insurers across developed European economies.

Snapshot (cost & size)

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.

The iShares financials fund is the more affordable option with a 0.38% expense ratio. However, income seekers may prefer the iShares Europe financials fund, which offers a significantly higher payout of 4%.

Performance & risk comparison

What’s inside

iShares MSCI Europe Financials ETF provides concentrated exposure to developed European financial markets across 84 holdings. The portfolio is heavily weighted toward financial services at 98%, with a trace allocation to technology. Its largest positions include HSBC Holdings at 9.9%, Banco Santander at 5.5%, and Allianz at 5.2%. It was launched in 2010. This fund has paid $1.65 per share over the trailing 12 months, which on its recent ~$41.7 share price works out to a 4.0% yield.

iShares U.S. Financials ETF offers a broader domestic strategy with 142 holdings, emphasizing large American institutions. The portfolio consists of 99% financial services and 1% real estate. Its top holdings include Berkshire Hathaway at 11.35%, JPMorgan Chase at 11.24%, and Bank of America at 4.72%. This concentration in domestic giants reflects the relative strength of the U.S. banking system. The fund was launched in 2000 and has paid $1.92 per share over the trailing 12 months, which on its recent ~$134.8 share price works out to a 1.4% yield.

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

What this means for investors

There are several standard reasons to invest in the financials sector, including diversification, dividend income, and growth. And choosing between iShares’ MSCI Europe Financials and U.S. Financials ETFs may come down to which of these aspects you prioritize. EUFN offers a much higher dividend payout and more robust recent growth, but charges a higher expense ratio and is more volatile than its domestic counterpart. It’s also more concentrated, with fewer total holdings than IYM despite similar total assets under management.

Yet it may offer a different diversification angle: Its focus on developed European financial markets means it’s less tied to the interest rate cycle here in the U.S. If your existing stock portfolio already contains many of the domestic financial giants (the financial sector makes up roughly 12% of the entire S&P 500 value), this may be compelling.

That said, these European financial companies are not immune from the effects of the machinations of the U.S. economy. They’re still affected by things like exchange rates and global financial activity, both in the U.S. and among the European nations represented in its fund. If you’re willing to take on the added cost and volatility, EUFN could provide growth, income, and diversification to your portfolio.

Bank of America is an advertising partner of Motley Fool Money. HSBC Holdings is an advertising partner of Motley Fool Money. JPMorgan Chase 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 recommends HSBC Holdings. The Motley Fool has a disclosure policy.