The big four banks—ANZ Group Holdings Ltd (ASX: ANZ), Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB), and Westpac Banking Corp (ASX: WBC)—are the backbone of the Australian financial system.
They dominate the lending market, generate billions in profits, and reward shareholders with fully franked dividends.
But when it comes to picking just one to invest in, things get tricky.
Right now, all four banks have seen share price pullbacks, making them potentially attractive buys for investors wanting exposure to this side of the market.
However, choosing which one to back isn't easy. CBA is the most dominant but also the most expensive. ANZ and NAB offer strong business banking exposure and Westpac is a consumer banking leader.
Instead of trying to pick a winner, there's a simpler solution with exchange traded funds (ETFs).
Image source: Getty Images
VanEck Australian Banks ETF (ASX: MVB)
The VanEck Australian Banks ETF gives investors exposure to a portfolio of Australian banks. Instead of betting on just one, you can own all the major players in a single trade.
The fund is heavily weighted towards the big four, with more than 80% of its assets currently spread across ANZ, CBA, NAB, and Westpac.
However, it also includes exposure to Macquarie Group Ltd (ASX: MQG), Bendigo and Adelaide Bank Ltd (ASX: BEN), and Bank of Queensland Ltd (ASX: BOQ).
For investors looking for dividends, the VanEck Australian Banks ETF could be an attractive choice. Australian banks have historically delivered strong dividend yields, and the fund currently boasts a 12-month income yield of 5.9% and a franking level of 91%.
Why consider this ASX ETF?
The fund manager, VanEck, highlights that investors can use the fund to gain diversified exposure to the banks. Rather than trying to pick which big four bank will outperform, you get exposure to them all. If one struggles, the others may pick up the slack.
Another positive is that the fund passes on all dividend income, providing a steady stream of cash flow.
A third positive is that this ASX ETF is a cost-effective way to invest in the sector. Buying individual bank shares means paying brokerage fees on each one. Whereas the VanEck Australian Banks ETF offers a way to own them all with just one transaction.
Foolish takeaway
If you're bullish on the banks but don't want to take on the risk of picking a single stock, this ASX ETF could be a smart option. With exposure to the biggest names in the sector, strong dividend potential, and built-in diversification, it offers a simple and effective way to invest in the financial backbone of Australia.
