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Should You Invest in the Vanguard Materials ETF (VAW)?

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Looking for broad exposure to the Materials - Broad segment of the equity market? You should consider the Vanguard Materials ETF (VAW - Free Report) , a passively managed exchange traded fund launched on 01/26/2004.

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 6, placing it in top 38%.

Index Details

The fund is sponsored by Vanguard. It has amassed assets over $3.03 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.


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 1.60%.

Sector Exposure and Top Holdings

ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Materials sector--about 99.80% of the portfolio.

Looking at individual holdings, Linde Plc (LIN - Free Report) accounts for about 17.10% of total assets, followed by Sherwin-Williams Co/the (SHW - Free Report) and Ecolab Inc (ECL - Free Report) .

The top 10 holdings account for about 51.71% of total assets under management.

Performance and Risk

Year-to-date, the Vanguard Materials ETF return is roughly 7.66% so far, and was up about 19.85% over the last 12 months (as of 05/21/2024). VAW has traded between $162.50 and $204.63 in this past 52-week period.

The ETF has a beta of 1.14 and standard deviation of 19.90% 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 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 - Free Report) tracks Materials Select Sector Index and the FlexShares Morningstar Global Upstream Natural Resources ETF (GUNR - Free Report) tracks Morningstar Global Upstream Natural Resources Index. Materials Select Sector SPDR ETF has $5.64 billion in assets, FlexShares Morningstar Global Upstream Natural Resources ETF has $6.68 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.

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