As Financials Rally, Is the Steady Vanguard Financials ETF or the Leveraged ProShares Ultra Financials the Better Buy Right Now?

Choosing between Vanguard Financials ETF (NYSEMKT:VFH) and ProShares - Ultra Financials (NYSEMKT:UYG) involves weighing the benefits of a low-cost, broad-market index fund against a highly volatile leveraged tool designed for short-term traders.

The financial sector encompasses everything from global banking giants to regional lenders and payment processors. Investors looking for exposure here could choose VFH for market-tracking stability or UYG for amplified daily returns. While VFH tracks a market-cap weighted index for long-term growth, the ProShares fund seeks double the daily return of its benchmark, which introduces risks from leverage decay over longer periods.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield as of the close of trading on July 23. Dividend yield for UYG excludes a short-term capital-gains payout to shareholders.

VFH is the more affordable option, while its counterpart charges a significantly higher fee for its leveraged strategy. The Vanguard fund offers a higher payout, though the ProShares fund actually returned more cash due to capital gains distributions, despite its different objective

Performance & risk comparison

What's inside

Vanguard Financials ETF holds 427 stocks and mirrors the performance of firms across the financial sector, including insurance, asset management, and investment banking. Its largest positions include JPMorgan Chase & Co (NYSE:JPM) at 9.2%, Berkshire Hathaway Inc (NYSE:BRKB) at 7.8%, and Mastercard Inc (NYSE:MA) at 4.7%. This passive approach provides wide diversification. It was launched in 2004. The Vanguard fund has paid $2.32 per share over the trailing 12 months, which on its recent ~$136.6 share price works out to a 1.70% yield.

The ProShares - Ultra Financials holds 84 positions and focuses on providing amplified exposure to financial services, with a 98% sector tilt toward that industry. Top holdings include Berkshire Hathaway at 7.8%, JPMorgan Chase & Co at 7.2%, and Proshares Genius Mny Mkt Etf (NYSEMKT:IQMM) at 5.02%, which is essentially a cash position for the fund. Because it resets leverage daily, it is generally considered a tactical tool rather than a core long-term holding. It was launched in 2007. ProShares Ultra Financials has paid $0.88 per share over the trailing 12 months, plus a short-term gains distribution of $9.83, which gets taxed as ordinary income to the shareholder. Counting that capital gain with dividend income, the yield is more than 11% on the ETF.

Which fund is the better buy?

Both funds provide exposure ot the U.S. financial services stocks in their portfolio. But they have very distinct differences investors need to take into account.

The Vanguard fund, VFH, is a traditional-styled ETF holding equities in its portfolio. The fund is skewed toward large-cap stocks, with 62% of holdings, with 25% in mid caps, and the balance in small caps.

UYG, the ProShares ETF, is leveraged, as noted earlier, which means its holdings include futures and options to achieve its goal of leveraged returns. This type of ETF often underperforms, particularly over longer periods with both upward and downward moves. That makes their net long-term risk disproportionally greater than their long-term potential upside.

UYG’s past performance shows that volatility. The fund is up 16% on the past three months but down 6% for the year-to-date 2026. It has returned 28.5% and 10.7% annualized over the past three and five years, respectively.

VFH, meanwhile, has been steadier. It’s up 9.6% the past three months and down less than 1% for the year-to-date. VFH has returned 19.7%, 10%, and 13.1% over the 3-year, 5-year, and 10-year time frames.

While UYG may be tempting because its leverage multiplies returns, investors seeking an appropriate, well-performing fund for the long haul are wise to choose Vanguard VFH.

For more guidance on ETF investing, check out the full guide at this link.

JPMorgan Chase is an advertising partner of Motley Fool Money. Brendan Coffey has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway, JPMorgan Chase, and Mastercard. The Motley Fool has a disclosure policy.