Launched on 01/26/2004, the Vanguard Materials ETF (VAW) 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 10, placing it in bottom 38%.
Index Details
The fund is sponsored by Vanguard. It has amassed assets over $2.83 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
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 0.10%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 1.62%.
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 99.90% of the portfolio.
Looking at individual holdings, Linde Plc (LIN) accounts for about 15.08% of total assets, followed by Sherwin-Williams Co/the (SHW) and Air Products And Chemicals Inc (APD).
The top 10 holdings account for about 43.46% of total assets under management.
Performance and Risk
The ETF return is roughly 5.19% so far this year and is up about 9.74% in the last one year (as of 01/29/2025). In that past 52-week period, it has traded between $179.63 and $215.21.
The ETF has a beta of 1.11 and standard deviation of 19.60% for the trailing three-year period, making it a medium risk choice in the space. With about 123 holdings, it effectively diversifies company-specific risk.
Alternatives
Vanguard Materials ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, VAW is an outstanding 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 $5.11 billion in assets, FlexShares Morningstar Global Upstream Natural Resources ETF has $5.13 billion. XLB has an expense ratio of 0.09% and GUNR charges 0.46%.
Bottom Line
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Vanguard Materials ETF (VAW): ETF Research Reports
Air Products and Chemicals, Inc. (APD) : 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
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
