The S&P 500 financials sector is the GICS grouping of the index's banks, insurers, capital markets firms, and payment and financial services companies. It carries roughly 12 to 13 percent of the S&P 500 as of August 2026, the second largest of the 11 sectors. Most investors get exposure through a sector fund like XLF or VFH.
Key takeaways
- Financials is the second largest sector in the S&P 500, at about 12.4 percent of the index as of August 24, 2026, behind only information technology. Sector weights move with prices, so treat any single figure as a snapshot.
- The sector spans four practical areas: banks, insurance, capital markets, and payments and financial services. GICS organizes these into three official industry groups: Banks, Financial Services, and Insurance.
- Berkshire Hathaway, JPMorgan Chase, Visa, Mastercard, and Bank of America are among the largest names.
- Since 2016, equity real estate has been its own sector, so financials no longer includes equity REITs. Mortgage REITs stayed in financials.
- Two low-cost ETFs cover the sector: the SPDR fund XLF (0.08 percent expense ratio) and Vanguard's VFH (0.09 percent).
- The sector is cyclical and rate-sensitive. Banks usually earn wider margins when rates rise, but credit losses climb in a downturn.
What "financials" actually means here
This page is about the financials sector, the group of companies inside the index. It is not about a company's financial statements or the accounting reports it files. If you came looking for balance sheets and income statements, that is a different topic. Here, "financials" is one of the 11 industry buckets that make up the S&P 500, sitting alongside technology, health care, energy, and the rest.
Standard & Poor's and MSCI sort every company in the index using the Global Industry Classification Standard, or GICS. The financials sector holds the businesses whose core work is money itself: taking deposits and lending, underwriting risk, moving payments, managing assets, and running the exchanges where securities trade.
One structural change matters for accuracy. In 2016, GICS pulled equity real estate out of financials and gave it a standalone Real Estate sector. So today's financials sector does not include equity REITs like office and retail landlords. Mortgage REITs, which lend against property rather than own it, remained inside financials. A second shift came in 2023, when payment networks such as Visa and Mastercard moved from technology into financials, which is why they now sit among the sector's largest holdings.
The industry groups inside the sector
| Area | Example companies | Role in the economy |
|---|---|---|
| Banks | JPMorgan Chase, Bank of America, Wells Fargo, regional banks | Take deposits, make loans, earn net interest income |
| Payments and financial services | Berkshire Hathaway, Visa, Mastercard, American Express, Capital One | Diversified holdings, card networks, payment processing, consumer lending |
| Capital markets | Goldman Sachs, Morgan Stanley, BlackRock, Blackstone, S&P Global, CME Group | Investment banking, trading, asset management, exchanges and data |
| Insurance | Progressive, Chubb, Travelers, MetLife, Aflac | Underwrite risk, collect premiums, invest the float |
GICS itself uses three top-level industry groups: Banks, Financial Services, and Insurance, with capital markets and payments folded under Financial Services. The four-way split above tracks how the businesses actually operate. Berkshire Hathaway is a special case. GICS files it under Financial Services as a diversified holding company, though its insurance operations like GEICO make it one of the largest insurers in the country too.
Largest constituents
Weights below reflect XLF, the SPDR fund that tracks the sector, as of its August 2026 holdings. The percentages show each name's share of the sector fund, not its share of the full S&P 500, where each company's weight is far smaller.
| Company | Ticker | Share of XLF |
|---|---|---|
| JPMorgan Chase | JPM | 12.0% |
| Berkshire Hathaway | BRK.B | 11.4% |
| Visa | V | 7.3% |
| Mastercard | MA | 5.5% |
| Bank of America | BAC | 5.2% |
| Goldman Sachs | GS | 3.7% |
| Wells Fargo | WFC | 3.3% |
| Morgan Stanley | MS | 3.2% |
The concentration at the top is worth noting. The five largest holdings make up more than 40 percent of the sector fund, so a sector position is really a bet on a handful of mega-cap financials as much as on banks broadly.
How to invest in the sector
You do not need to buy individual bank stocks to own the sector. Two exchange-traded funds do the job cheaply:
- XLF, the Financial Select Sector SPDR Fund. Run by State Street, it holds the roughly 70 financials companies in the S&P 500 and weights them by market cap. Expense ratio is 0.08 percent. It is the most heavily traded way to play the sector.
- VFH, the Vanguard Financials ETF. It tracks a broader index of about 400 U.S. financial companies, so it reaches deeper into mid-cap and small-cap banks and insurers than XLF does. Expense ratio is 0.09 percent.
The main difference is breadth. XLF sticks to the large-cap names already in the S&P 500. VFH adds hundreds of smaller financials on top of those. Both are dominated by the same giants at the top.
If you already hold a total-market or S&P 500 index fund, you own this sector without doing anything. Buying XLF or VFH on top of that is a deliberate tilt toward financials, a choice some investors make when they think banks and insurers are cheap or set to benefit from rising rates. Because financials trade at lower valuations than the index overall, they also show up heavily in value strategies like the Vanguard S&P 500 Value ETF. Sector tilts are one of the levers people pull when they are trying to beat the S&P 500, though concentrating in one sector cuts both ways.
Rate sensitivity and cyclicality
Two forces drive this sector more than almost any other: interest rates and the economic cycle.
Rates. Banks make much of their money on the spread between what they earn on loans and what they pay on deposits, the net interest margin. When rates rise, that spread often widens and bank earnings improve. Insurers benefit too, since they reinvest premium income at higher yields. But rate moves are not a one-way bet. A sharp spike can dent the value of bonds banks already hold, and an inverted yield curve, where short rates sit above long rates, squeezes lending margins. Higher rates also cool mortgage demand and deal-making, which hits capital markets firms.
The cycle. Financials are cyclical, meaning their fortunes swing with the broader economy. In an expansion, loan demand grows, transaction volumes rise, defaults stay low, and profits climb. In a downturn, the opposite happens: borrowers miss payments, credit losses mount, and capital markets activity dries up. The 2008 financial crisis is the extreme version of this, when soured mortgages and a frozen credit system pushed several large institutions to the brink.
For an investor, that combination means financials can outperform sharply when the economy is strong and rates are climbing, and can fall hard when growth stalls or credit turns. It is a different risk profile from a tech-heavy fund like QQQ, which is driven far more by growth expectations than by interest rates and credit conditions.
The bottom line
The financials sector is the second largest slice of the S&P 500, a cyclical, rate-sensitive group of banks, insurers, capital markets firms, and payment networks. XLF and VFH are the two standard, low-cost ways to own it. Just remember that the sector is concentrated at the top and moves with rates and the credit cycle, so a tilt here is a specific view, not a diversified bet.
Figures in this article reflect fund holdings and S&P 500 sector weight data as of late August 2026 and change as markets move.
Frequently asked questions
How big is the financials sector within the S&P 500?
Financials is the second largest sector in the S&P 500, at about 12.4 percent of the index as of August 24, 2026, behind only information technology. Sector weights move with prices, so treat any single figure as a snapshot. Berkshire Hathaway, JPMorgan Chase, Visa, Mastercard, and Bank of America are among its largest names.
Are equity REITs part of the S&P 500 financials sector?
No, equity REITs are no longer in financials. In 2016, GICS pulled equity real estate out of financials and gave it a standalone Real Estate sector, so today's financials sector does not include office and retail landlords. Mortgage REITs, which lend against property rather than own it, remained inside financials.
What is the cheapest way to invest in the S&P 500 financials sector?
Two low-cost ETFs cover the sector: the SPDR fund XLF at a 0.08 percent expense ratio and Vanguard's VFH at 0.09 percent. XLF holds the roughly 70 financials companies in the S&P 500, while VFH tracks a broader index of about 400 US financial companies, reaching deeper into mid-cap and small-cap names. Both are dominated by the same giants at the top.
Why are financial stocks so sensitive to interest rates?
Financials are rate-sensitive because banks make much of their money on the net interest margin, the spread between what they earn on loans and pay on deposits. When rates rise, that spread often widens and earnings improve, and insurers reinvest premiums at higher yields. But a sharp spike can dent bonds banks already hold, and an inverted yield curve squeezes lending margins.
Why did Visa and Mastercard move into the financials sector?
Visa and Mastercard moved from technology into financials in a 2023 GICS shift, which is why the payment networks now sit among the sector's largest holdings. GICS classifies the sector into three top-level groups, Banks, Financial Services, and Insurance, with capital markets and payments folded under Financial Services.