Money Machines is a Financial Services ETF. Why invest in financial services? We break it down.
Financial Services J.P. Morgan
Ever heard of General Electric (GE), AT&T (T), or US Steel (X)? We thought so. Their existence was made possible thanks to the bankroll of our friend, John Pierpoint Morgan (from here on affectionately nicknamed “JPM”).
During the early 1900s, JPM was in the empire building business and business was booming. In fact, business was so good that JPM’s company, JP Morgan Chase (JPM), lives on today as the biggest bank on Wall Street and is also the biggest holding in Money Machines.
Why should I invest in Money Machines?
Admittedly, Wall Street hasn’t done a great job of fostering trust, and has given the wider financial services industry a bad rap, particularly in the last decade. However, banks are a vital part of any healthy economic ecosystem. In general, banks exist to serve an important function: connect those with money to those who need money.
For example, let’s say Jennifer, a recent college grad, needs a car to get to work, but doesn’t have the savings to buy it outright with cash. Worse yet, she can’t get the cash to buy the car without working. Jennifer is stuck in a catch-22.
This is where the bank comes in. The bank will loan Jennifer money and will ask her to repay over time, with a little extra on top as interest. In this situation everyone wins, because Jennifer has a car that she can drive to work, the car dealer made a sale, and the bank gets to make money by bridging the gap between both parties. The economic wheel keeps turning.
However, if there was no bank, then Jennifer might need to try to borrow money from family, friends, and neighbors — always a recipe for disaster and often pretty inefficient.
It’s clear that banks are pretty important, so let’s get down to why you might want to invest in an ETF that represents the financial services industry.
Alright, tell me which companies I would be investing in…
Money Machines has all the big players on Wall Street and beyond. Besides JP Morgan Chase (JPM), there is also Wells Fargo (WFC), Bank of America (BAC), Citigroup (C), Berkshire Hathaway (BRK-A & BRK-B), AIG (AIG), and Goldman Sachs (GS). It’s a who’s who of the financial services industry. But it’s not just the logos that are impressive, the real draw is the range of services they provide and the key role they play in the US and Global economy. These financial titans can help set up a savings account, lend money, write insurance policies, or advise on how to merge multi-billion dollar companies, and the many things in between. If money is involved, they can help.
So, is Money Machines a good investment for me?
Money Machines could be a great investment for anyone who wants a mainline into the heart of the global economy, or just likes the idea of owning parts of businesses that are built on money itself. However, while Money Machines could be a good addition to a diversified portfolio, it shouldn’t be your only investment. As everyone learned in the financial crisis of 2008, having too many of your eggs in one basket is just too risky.
Cool — is there anything else I should know before investing?
Two numbers: the expense ratio of the fund is 0.10% and the dividend yield is 1.78%.
An expense ratio of 0.10% is at the low end of management fees. The dividend yield of 1.78% is important because this means that the fund has paid dividends of nearly two percent of its share price in the last year. And who doesn’t enjoy getting paid cash for holding onto an investment?
If you want to do your own research on Money Machines, then check out the underlying ETF — Vanguard Financials Index Fund (VFH). The ETF is run by The Vanguard Group, which manages over $3 trillion in assets, and is the second largest provider of ETFs in the world.
Are there other investments like Money Machines?
If you like the idea of investing in specific industries or sectors, maybe check out:
Clean and Green: Clean energy companies including providers of solar and wind power.
Defending America: Aerospace and defense companies that help protect our country.
Wireless Wonders: Telecom leaders that keep us online, in range, and on-the-go.