Should You Invest in the Vanguard Materials ETF (VAW)?
If you're interested in broad exposure to the Materials - Broad segment of the equity market, look no further than the Vanguard Materials ETF (VAW), a passively managed exchange traded fund launched on 01/26/2004.
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 also provide investors access to a broad group of companies in particular sectors that offer low risk and diversified exposure. 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 Vanguard. It has amassed assets over $3 billion, making it one of the larger ETFs attempting to match the performance of the Materials - Broad segment of the equity market. VAW seeks to match the performance of the MSCI US Investable Market Materials 25/50 Index before fees and expenses.
The MSCI US Investable Market Materials 25/50 Index includes stocks of U.S. companies within the materials sector.
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 0.10%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 1.90%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Materials sector--about 100% of the portfolio.
Looking at individual holdings, Linde Plc (LIN) accounts for about 13.08% of total assets, followed by Sherwin-Williams Co. (SHW) and Freeport-Mcmoran Inc. (FCX).
The top 10 holdings account for about 47.68% of total assets under management.
Performance and Risk
So far this year, VAW has lost about -11.20%, and is down about -7.21% in the last one year (as of 08/30/2022). During this past 52-week period, the fund has traded between $154.89 and $199.49.
The ETF has a beta of 1.10 and standard deviation of 27.78% for the trailing three-year period, making it a medium risk choice in the space. With about 122 holdings, it effectively diversifies company-specific risk.
Alternatives
Vanguard Materials ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, VAW is an excellent option for investors seeking exposure to the Materials ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.
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 $5.84 billion in assets, FlexShares Morningstar Global Upstream Natural Resources ETF has $7.52 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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Vanguard Materials ETF (VAW): ETF Research Reports
FreeportMcMoRan Inc. (FCX) : Free Stock Analysis Report
The SherwinWilliams Company (SHW) : 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
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