The Vanguard Financials Index Fund ETF (VFH) and the Fidelity MSCI Financials Index ETF (FNCL) are two of the largest financials sector ETFs and two of the most popular among individual investors. Many investors compare VFH vs FNCL because they are so similar, although differences are difficult to find.
A quick reminder that this site does NOT provide investment recommendations. Fund comparisons (such as this one) are not conducted to identify the “best” fund (since that will vary from investor to investor based on investor-specific factors). Rather, these fund comparison posts are designed to identify and distinguish between the fund details that matter versus the ones that don’t.
The Short Answer
VFH and FNCL track the same index and there is no material difference between the funds. They are identical and interchangeable in my opinion.
The Longer Answer
Historical Performance: VFH vs FNCL
VFH was launched back in 2004, while FNCL was launched on October 21, 2013. Since then, the two funds have performed identically, with an annualized difference of only .02%! The cumulative performance differential over that timeframe has only been about .45% too! From a performance perspective, VFH and FNCL are identical and interchangeable.
Portfolio Exposures: VFH vs FNCL
Both VFH and FNCL track the same index, the MSCI US Investable Market Financials 25/50 Index. Consequently, the two funds have identical geographic, market-cap, and industry exposures.
Geographic Exposure
Both VFH and FNCL hold essentially 100% stocks, so I will not dig into country exposures or market classification here. For all intents and purposes, the two funds have identical geographic exposures.
Market Cap Exposure
As mentioned above, both funds track the same index and have materially identical market cap exposures.
Sector Exposure
VFH and FNCL are financial sector ETFs and so their holdings are 100% financials stocks.
Practical Factors: VFH vs FNCL
Transaction Costs
As ETFs, both FNCL and VFH are free to trade on many platforms. Bid-ask spreads for both VFH and FNCL are extremely low and volume is sufficient to prevent most individual investors from “moving the market.”
Expenses
FNCL has a lower expense ratio at .08%, compared to VFH’s .10%. Although VFH is 25% more expensive, we’re talking about 2 basis points. At these low levels of expense ratios, the difference doesn’t matter.
Tax Efficiency & Capital Gain Distributions
Neither VFH nor FNCL has ever made a capital gains distribution and I do not expect them to make any moving forward. In my opinion, these two funds are equally tax-efficient.
From a tax-loss harvesting perspective, investors may want to avoid using these two funds as substitutes for one another since they could be considered “substantially identical” (given that they track the same index and are identical in many ways). Investors may want to consider State Street’s ETF XLF and should read my comparison of VFH vs XLF.
Bottom Line: VFH vs FNCL
VFH and FNCL are identical in nearly every way. I would not spend any time comparing them or trying to decide which is better.
Investors looking for a mutual fund should read my comparison of VFH vs VFAIX (which is the mutual fund share class of VFH).
