Should You Invest in the Vanguard Materials ETF (VAW)?
Sector ETF report for VAW
Looking for broad exposure to the Materials - Broad segment of the equity market? You should consider 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 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 14, placing it in bottom 13%.
The fund is sponsored by Vanguard. It has amassed assets over $3.86 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.
When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.
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 1.54%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. 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 100% of the portfolio.
Looking at individual holdings, Linde Plc (LIN) accounts for about 11.99% of total assets, followed by Sherwin-Williams Co. (SHW) and Air Products And Chemicals Inc. (APD).
The top 10 holdings account for about 49.28% of total assets under management.
Performance and Risk
So far this year, VAW has added roughly 19.65%, and was up about 33.81% in the last one year (as of 10/20/2021). During this past 52-week period, the fund has traded between $132.46 and $194.47.
The ETF has a beta of 1.13 and standard deviation of 27.06% for the trailing three-year period, making it a medium risk choice in the space. With about 118 holdings, it effectively diversifies company-specific risk.
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.
FlexShares Morningstar Global Upstream Natural Resources ETF (GUNR) tracks Morningstar Global Upstream Natural Resources Index and the Materials Select Sector SPDR ETF (XLB) tracks Materials Select Sector Index. FlexShares Morningstar Global Upstream Natural Resources ETF has $6.11 billion in assets, Materials Select Sector SPDR ETF has $7.53 billion. GUNR has an expense ratio of 0.46% and XLB charges 0.12%.
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
Air Products and Chemicals, Inc. (APD): 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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