Should You Invest in the iShares U.S. Basic Materials ETF (IYM)?
Launched on 06/12/2000, the iShares U.S. Basic Materials ETF (IYM) is a passively managed exchange traded fund designed to provide a broad exposure to the Materials - Broad segment of the equity market.
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.
Sector ETFs are also funds of convenience, offering many ways 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 16, placing it in bottom 0%.
Index Details
The fund is sponsored by Blackrock. It has amassed assets over $786.23 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
Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.
Annual operating expenses for this ETF are 0.39%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 1.81%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Materials sector--about 92.50% of the portfolio.
Looking at individual holdings, Linde Plc (LIN) accounts for about 19.84% of total assets, followed by Air Products And Chemicals Inc (APD) and Freeport Mcmoran Inc (FCX).
The top 10 holdings account for about 57.51% of total assets under management.
Performance and Risk
So far this year, IYM has added about 7.59%, and it's up approximately 4.21% in the last one year (as of 08/15/2023). During this past 52-week period, the fund has traded between $106.58 and $140.43.
The ETF has a beta of 1.16 and standard deviation of 22.66% for the trailing three-year period, making it a high risk choice in the space. With about 45 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 reasonable 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 $5.91 billion in assets, FlexShares Morningstar Global Upstream Natural Resources ETF has $7.32 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.
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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
