Should You Invest in the Vanguard Materials ETF (VAW)?
The Vanguard Materials ETF (VAW) was launched on 01/26/2004, and is a passively managed exchange traded fund designed to offer broad exposure to the Materials - Broad segment of the equity market.
Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are 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 8, placing it in top 50%.
Index Details
The fund is sponsored by Vanguard. It has amassed assets over $2.96 billion, making it one of the largest 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 1.63%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. 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 16.63% of total assets, followed by Sherwin-Williams Co/the (SHW) and Freeport-Mcmoran Inc (FCX).
The top 10 holdings account for about 40.11% of total assets under management.
Performance and Risk
Year-to-date, the Vanguard Materials ETF has gained about 5.64% so far, and it's up approximately 9.60% over the last 12 months (as of 07/23/2024). VAW has traded between $162.50 and $204.63 in this past 52-week period.
The ETF has a beta of 1.10 and standard deviation of 19.74% for the trailing three-year period, making it a medium risk choice in the space. With about 116 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 a great 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 $5.68 billion in assets, FlexShares Morningstar Global Upstream Natural Resources ETF has $5.86 billion. XLB has an expense ratio of 0.09% 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
Vanguard Materials ETF (VAW): ETF Research Reports
Freeport-McMoRan Inc. (FCX) : Free Stock Analysis Report
The Sherwin-Williams 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