Should you invest in the iShares US Basic Materials ETF (IYM)?

LLaunched on 12/06/2000, the iShares US Basic Materials ETF (IYM) is a passively managed exchange-traded fund designed to provide broad exposure to the Materials – Broad segment of the equity market.

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility and tax efficiency; they are also excellent vehicles for long-term investors.

Investor-friendly sector ETFs offer many options for gaining low-risk, diversified exposure to a broad group of companies in particular sectors. Materials – Large is one of 16 major Zacks sectors within the Zacks Industry classification. He is currently ranked 13, which puts him in the bottom 19%.

Index details

The fund is sponsored by Blackrock. It has amassed assets of over $876.11 million, making it one of the mid-sized ETFs attempting to match the performance of the Materials-Large segment of the stock market. IYM seeks to match the performance of the Dow Jones US Basic Materials Index before fees and expenses.

The Russell 1000 Basic Materials RIC 22.5/45 Capped Gross Index measures the performance of the basic materials sector of the US stock market.

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.

The annual operating expense of this ETF is 0.41%, putting it on par with most peer products on the market.

It has a 12-month dividend yield of 2.17%.

Sector exposure and main holdings

Although ETFs provide diversified exposure, which minimizes single-stock risk, a thorough examination of 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 the largest allocation to the materials sector, approximately 93.60% of the portfolio.

In terms of individual holdings, Freeport Mcmoran Inc (FCX) accounts for approximately 9.40% of total assets, followed by Newmont (NEM) and Air Products And Chemicals Inc (APD).

The top 10 holdings represent approximately 59.30% of total assets under management.

Performance and risks

So far this year, IYM has lost around -17.32% and is down around -10.60% over the past year (as of 07/18/2022). During this last 52-week period, the fund traded between $111.64 and $154.02.

The ETF has a beta of 1.16 and a standard deviation of 28.01% for the three-year period, making it a high-risk pick in the space. With around 41 holdings, it has more concentrated exposure than its peers.

Alternatives

IShares US Basic 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. For this reason, IYM is a great option for investors seeking exposure to the materials ETF segment of the market. There are other additional ETFs in the space that investors might also consider.

The SPDR Materials Select Sector ETF (XLB) tracks the Materials Select Sector Index and the FlexShares Morningstar Global Upstream Natural Resources ETF (GUNR) tracks the Morningstar Global Upstream Natural Resources Index. Materials Select Sector SPDR ETF has $5.89 billion in assets, FlexShares Morningstar Global Upstream Natural Resources ETF has $6.99 billion. XLB has an expense ratio of 0.10% and GUNR charges 0.46%.

Conclusion

To learn more about this product and other ETFs, find products that fit your investment goals, and read articles about the latest developments in the ETF investment universe, please visit Zacks ETF Center.

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iShares US Basic Materials ETF (IYM): ETF Research Reports

Air Products and Chemicals, Inc. (APD): Free Inventory Analysis Report

FreeportMcMoRan Inc. (FCX): Free Stock Analysis Report

Newmont Corporation (NEM): Free Stock Analysis Report

Materials Select Sector SPDR ETF (XLB): ETF Research Reports

FlexShares Morningstar Global Upstream Natural Resources ETF (GUNR): ETF Research Reports

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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