How to Invest in SPDR S&P Regional Banking ETF (KRE) #NewsETFs

Remember the 2023 regional bank crisis and the brief period when many small- and mid-cap banking stocks were trading at attractive valuations?

Maybe you hesitated to buy the dip because valuing individual banks is complex and risky due to concentration.

With the SPDR S&P Regional Banking ETF (CREATE 1.29%), you don’t need to research individual banks. Instead, you can invest in a diversified portfolio of regional banks all through a single ticker.

In this guide, we’ll go over what KRE is, what it holds, how to buy it, its historical performance, and everything you need to know about the pros and cons before making a buying decision.

What is KRE?

What is KRE?

KRE is a passive ETF that seeks to replicate the performance and constituents of a benchmark, specifically the S&P Regional Banks Select Industry index.

This index pulls from the broader S&P Total Market index (TMI) and isolates stocks specifically identified as part of the regional banking industry.

One unique aspect of KRE is that it weights all of its stocks equally, meaning that regardless of a bank’s size, it receives the same weight during each rebalance.

As a result, KRE is considered one of the riskier sector-specific funds. It focuses on a narrower industry — regional banks — and gives equal weight to more volatile small-cap and mid-cap stocks, increasing the fund’s overall risk exposure.

How to buy KRE

How to buy KRE

Buying shares of KRE is similar to investing in most ETFs. Here’s a step-by-step guide to get started:

1. Open a brokerage account. If you don’t already have one, you’ll need a brokerage account that allows ETF trading. Most brokers offer this feature, but it’s worth checking.
2. Decide your investment amount. Based on your financial goals and risk tolerance, determine how much you want to invest in KRE.
3. Search for the ticker. Enter “KRE” in your broker’s search bar to find the SPDR S&P Regional Banking ETF. Make sure you’re selecting shares and not any other product, such as options.
4. Place your order. Enter the number of shares you’d like to buy, set your price if placing a limit order, and confirm your purchase.

Once your order is completed, you’ll own shares of KRE, giving you exposure to its portfolio of regional banks.

Holdings of KRE

Holdings of KRE

KRE’s portfolio typically consists of around 140 equally weighted holdings.

As mentioned earlier, the top holdings in this ETF tend to be regional banks that have outperformed between rebalances.

Here are the current top holdings as of Sept. 13, 2024:

• Western Alliance Bancorp (WAL 0.54%) – 2.54%
• Columbia Banking System (COLB 1.4%) – 2.42%
• Valley National Bancorp (FLY 2.35%) – 2.37%
• Synovus Financial Corporation (SNV 0.38%) – 2.26%
• Regions Financial Corporation (RF 1.5%) – 2.23%
• Truist Financial Corporation (TFC 0.69%) – 2.23%
• Citizens Financial Group (CFG 1.27%) – 2.21%
• M&T Bank Corporation (MTB 2.49%) – 2.21%
• Huntington Bancshares Incorporated (HBAN 1.81%) – 2.17%
• East West Bancorp (EWBC 0.62%) – 2.13%

Should I invest?

Should I invest in KRE?

KRE could be a suitable investment if:

1. You’re bullish on the regional banking sector.
2. You want more exposure to small-cap stocks through equal weighting.
3. You’re OK with a concentration in a specific industry.
4. You understand the high volatility of regional banks.
5. You’re comfortable with the possibility of extended and deep unrealized losses.
6. You prefer to stay diversified across the industry rather than picking individual regional banks.

If these align with your investment strategy, KRE may be a good fit for your portfolio. If not, KRE might not be the best ETF for you.

Dividends

Does KRE pay a dividend?

Many regional banks offer generous dividend yields, and as a result, KRE collects these dividends and pays them out to shareholders on a quarterly basis.

As of Sept. 13, KRE has a 30-day SEC yield of 2.91%, though this yield can fluctuate based on changes in the ETF’s price and the underlying bank dividends.

Expense ratio

What is KRE’s expense ratio?

The expense ratio is the annual fee charged by an ETF to cover its management and operational costs.

It’s calculated as a percentage of your total investment and deducted from the fund’s returns over time, so while you don’t pay it directly, it does impact your overall returns.

KRE’s expense ratio is 0.35%, which means you’ll pay about $35 per $10,000 invested annually. This fee is typical for a sector or industry-specific ETF like KRE.

Historical performance

Historical performance of KRE

Here’s how KRE has performed historically based on total returns (i.e., with dividends reinvested):

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The bottom line on KRE

KRE is best used as a specialized satellite holding in your portfolio, complementing a more broadly diversified core of long-term, broad-market ETFs.

It’s suitable for expressing a bullish view on the regional banking industry or can be sold short to hedge against another crisis like the one in 2023.

While it pays a decent yield, most dividend-focused investors may prefer a more diversified option for consistent income generation over a sector-specific ETF like KRE.

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