Should You Invest in the iShares U.S. Basic Materials ETF (IYM)?
If you're interested in broad exposure to the Materials - Broad segment of the equity market, look no further than the iShares U.S. Basic Materials ETF (IYM), a passively managed exchange traded fund launched on 06/12/2000.
Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.
Investor-friendly, sector ETFs provide many options to gain low risk and diversified exposure to a broad group of companies in particular sectors. Materials - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 14, placing it in bottom 13%.
Index Details
The fund is sponsored by Blackrock. It has amassed assets over $662.92 million, making it one of the average sized ETFs attempting to match the performance of the Materials - Broad segment of the equity market. IYM seeks to match the performance of the Dow Jones U.S. Basic Materials Index before fees and expenses.
The Russell 1000 Basic Materials RIC 22.5/45 Capped Gross Index measures the performance of the basic materials sector of the U.S. equity market.
Costs
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.
Annual operating expenses for this ETF are 0.40%, making it one of the cheaper products in the space.
It has a 12-month trailing dividend yield of 1.93%.
Sector Exposure and Top Holdings
ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Materials sector--about 92% of the portfolio.
Looking at individual holdings, Linde Plc (LIN) accounts for about 20.27% of total assets, followed by Air Products And Chemicals Inc (APD) and Freeport Mcmoran Inc (FCX).
The top 10 holdings account for about 64.62% of total assets under management.
Performance and Risk
The ETF return is roughly 1.62% so far this year and is up about 12.58% in the last one year (as of 10/16/2023). In that past 52-week period, it has traded between $111.94 and $140.43.
The ETF has a beta of 1.16 and standard deviation of 22.17% for the trailing three-year period, making it a high risk choice in the space. With about 43 holdings, it has more concentrated exposure than peers.
Alternatives
IShares U.S. Basic Materials ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, IYM is a good option for those seeking exposure to the Materials ETFs area of the market. Investors might also want to consider some other ETF options in the space.
Materials Select Sector SPDR ETF (XLB) tracks Materials Select Sector Index and the FlexShares Morningstar Global Upstream Natural Resources ETF (GUNR) tracks Morningstar Global Upstream Natural Resources Index. Materials Select Sector SPDR ETF has $5.31 billion in assets, FlexShares Morningstar Global Upstream Natural Resources ETF has $7.20 billion. XLB has an expense ratio of 0.10% and GUNR charges 0.46%.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
iShares U.S. Basic Materials ETF (IYM): ETF Research Reports
Air Products and Chemicals, Inc. (APD) : Free Stock Analysis Report
Freeport-McMoRan Inc. (FCX) : Free Stock Analysis Report
Materials Select Sector SPDR ETF (XLB): ETF Research Reports
Linde PLC (LIN) : Free Stock Analysis Report
FlexShares Morningstar Global Upstream Natural Resources ETF (GUNR): ETF Research Reports
