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By Scott Burns | 09-09-2009 12:17 PM

Easy Money Already Made in Financials

One year after Lehman and six months into a furious rally, Morningstar ETF analysts Scott Burns and John Gabriel say investors need to tread carefully in the sector.

Scott Burns: Looking back a year after Lehman, join us as we take a look at the financial ETF landscape. Hi there, I'm Scott Burns with Morningstar. Joining me is ETF analyst, John Gabriel. John, thanks for joining us.

John Gabriel: Great to be here.

Burns: So, Lehman Brothers and all the financial collapse that really kind of crescendoed in September and then continued on through March, you know we are coming up on the year anniversary here, so we thought it would be a good time to take a look at the financial sector ETFs as we like to call it the "oft in the news" financial sector.

Just take a look at the various sub-industries here and see what's happening. When we talk about the big, broadest, most widely held financial sector ETFs, we are talking about the Financial Sector SPDR, the XLF, the Vanguard Financials, the iShares Dow Jones US Financials, when we look at these, there is actually a pretty common breakdown in the sub-industries is how they look?

Gabriel: Right. And it is important to understand that breakdown because each industry and each sub-industry has unique characteristics that could drive performance. So, within those portfolios, it is about 45 percent of the banks. So, you are thinking Citigroup, Bank of America, the regional banks, all of the sort. And then next up you have insurance companies with life, property, casualty, all title insurers, mortgage insurers and that will be another 20 percent of the portfolio. Below that you have capital markets firms and that includes exchanges, brokerages, the former investment banks, Goldman Sachs, Morgan Stanley and below that, about 10 percent of the portfolio rounding it out is REITs.

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