Bank shares have been fantastic wealth creators over the long run, and I'm not anti-banks by any stretch. But at this point in the cycle, I'm finding it hard to get excited about ANZ Group Holdings Ltd (ASX: ANZ) shares.
ANZ's valuation looks full, growth is likely to be modest, and a lot of good news already appears to be priced in. If I were a bank-focused investor looking to deploy new money today, I'd avoid ANZ and look at some ASX exchange-traded funds (ETFs) that offer income, diversification, and less reliance on one institution getting everything right.
Here are the ASX ETFs I'd choose instead.
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Vanguard Australian Shares Index ETF (ASX: VAS)
The Vanguard Australian Shares Index ETF is where I'd start if my goal were to reduce single-bank risk while still benefiting from the Australian financial system.
The VAS ETF provides broad exposure to the ASX 300, meaning banks still play a meaningful role but are no longer the whole story. You get exposure to resources, healthcare, infrastructure, consumer stocks, and industrials alongside the banks.
Importantly, this spreads risk. If bank earnings growth slows or margins compress, other sectors can pick up the slack. For investors who like the income profile of banks but don't want to bet heavily on ANZ shares alone, this feels like a much more balanced option.
Betashares Australian Quality ETF (ASX: AQLT)
The Betashares Australian Quality ETF appeals to me as a smarter way to own financials.
Instead of weighting companies purely by size, the AQLT ETF focuses on quality metrics like return on equity, balance sheet strength, and earnings stability. That naturally favours better-run businesses and reduces exposure to weaker operators.
Banks still feature in the portfolio, but only where they meet those quality criteria. The result is a portfolio that tends to look more defensive and resilient across cycles, which I think matters when valuations are already elevated.
If I'm worried about paying too much for bank earnings today, I'd rather let a quality filter do some of the heavy lifting for me.
Vanguard Australian Shares High Yield ETF (ASX: VHY)
The Vanguard Australian Shares High Yield ETF would be my pick for investors whose main attraction to ANZ shares is income.
The VHY ETF provides exposure to Australian shares with higher forecast dividends, while capping concentration at both the company and sector level. Banks remain important contributors to income, but they are not allowed to dominate the portfolio entirely.
That makes the income stream feel more sustainable to me. You're still tapping into the dividend power of the big banks, but you're also collecting income from other sectors that generate reliable cash flow.
For income-focused investors, this strikes a better balance between yield and risk than owning a single bank stock at a full valuation.
Foolish Takeaway
ANZ bank shares have had a strong run, but at current prices, I think the easy money has already been made. Earnings growth looks modest, competition is intense, and valuation support isn't as compelling as it once was.
If I were investing fresh capital today, I'd rather own ASX ETFs that still benefit from the strength of Australian banks, while also providing diversification, quality filters, and multiple income streams.
