Material Sector ETFs

Materials Select Sector SPDR Fund (XLB)

Company Description: XLB is the benchmark fund for the U.S. Materials sector. It tracks the Materials Select Sector Index, which includes the materials companies in the S&P 500. This fund is market-cap weighted, meaning the largest companies have the biggest influence on performance.

Conservative Investing Strategy: Use XLB as a long-term, passive exposure to the sector. Hold it for portfolio diversification, recognizing that its cyclical nature means you should be prepared for volatility, but aim to capture long-term economic growth.

Moderate Investing Strategy: Employ a "leading indicator" strategy. Increase your allocation to XLB when you anticipate a new economic expansion or a pickup in global manufacturing activity, selling your position once the economic cycle begins to mature.

Advanced Investing Strategy: Execute a ratio trade against defensive sectors (like Utilities, XLU). When the XLB/XLU price ratio begins to sharply increase, it suggests money is rapidly rotating from defense to offense, signaling a high-conviction bet on economic acceleration.

Traders Insight: XLB is highly liquid and has tight bid/ask spreads, making it excellent for high-volume trading and tactical allocation shifts. Its performance is often tied to global trade data and commodity price movements.

Valuable Section: Top Holdings Concentration: Due to its market-cap weighting, performance is highly dependent on a few mega-cap chemical companies. Be aware that the top 5 holdings can account for a significant portion of the fund's assets, increasing single-stock risk within the basket.

Learn More

Vanguard Materials ETF (VAW)

Company Description: VAW offers broad, low-cost exposure to the entire U.S. Materials sector, tracking the MSCI US Investable Market Materials 25/50 Index. Similar to XLB but includes mid- and small-cap stocks in addition to large-cap names.

Conservative Investing Strategy: Choose VAW for your core materials allocation because its ultra-low expense ratio maximizes your long-term, compounding returns. The inclusion of mid- and small-caps provides broader market representation than large-cap only funds.

Moderate Investing Strategy: Use VAW to gain sector exposure while benefiting from the potential outperformance of smaller companies during strong economic recoveries. The lower cost helps enhance returns during these upswings.

Advanced Investing Strategy: Implement a sector factor tilt. While XLB is purely market-cap weighted, VAW's broader exposure may offer a better proxy for the overall Materials industry's revenue growth rather than just large-cap market movements. Use it to bet on fundamental sector health.

Traders Insight: While extremely cost-efficient, VAW is generally less liquid than XLB. For most retail traders, this difference is negligible, but for institutional traders making massive transactions, XLB is often preferred.

Valuable Section: All-Cap Coverage: By tracking an index that includes small and mid-cap companies, VAW offers a more comprehensive view of the U.S. materials industry, capturing companies focused on niche materials or regional markets that a large-cap fund might miss.

Learn More

iShares U.S. Basic Materials ETF (IYM)

Company Description: IYM tracks the Russell 1000 Basic Materials RIC 22.5/45 Capped Index, providing exposure to U.S. companies involved in producing raw materials, including chemicals, metals, and forest products.

Conservative Investing Strategy: A reliable, diversified core holding for U.S. materials exposure. Its long track record and backing by BlackRock (iShares) make it a trusted, stable choice for long-term investors.

Moderate Investing Strategy: Use IYM when you specifically favor the Russell 1000 construction of the materials sector over the S&P 500's GICS sector definition (used by XLB). This subtle difference can offer a tactical tilt based on index rebalancing cycles.

Advanced Investing Strategy: Employ an intermarket analysis strategy. Since basic materials are commodity-intensive, use the performance of IYM relative to the broader market to confirm the strength or weakness in underlying commodity price trends.

Traders Insight: IYM often has an expense ratio slightly higher than VAW but offers comparable liquidity to XLB. This puts it in a middle ground, often used by institutional traders who value the Russell index family.

Valuable Section: Index Methodology Difference: The "Basic Materials" classification used by its index can sometimes differ from the broader "Materials" used by XLB or VAW, potentially offering slightly different sub-sector weightings and exposure.

Learn More

Fidelity MSCI Materials Index ETF (FMAT)

Company Description: FMAT is Fidelity's low-cost offering, seeking to track the MSCI USA IMI Materials 25/50 Index. It is virtually identical to Vanguard's VAW in its underlying index and goal: broad U.S. exposure across all market caps.

Conservative Investing Strategy: The ideal choice for Fidelity brokerage account holders, as it minimizes internal costs and fees, allowing for low-cost, long-term exposure to the materials sector.

Moderate Investing Strategy: Use FMAT as the materials component in a diversified, low-cost "four-fund" or "five-fund" portfolio alongside other low-cost sector or broad market ETFs. This maximizes cost-efficiency.

Advanced Investing Strategy: Utilize FMAT for tax-loss harvesting against VAW (or vice versa). Since they track the same underlying index but are different funds, you can swap them to realize a loss for tax purposes without losing your critical sector exposure.

Traders Insight: Its extremely low expense ratio makes it highly competitive, a critical factor in a cyclical sector where performance can be volatile year-to-year.

Valuable Section: The Cost Leader: FMAT often competes directly with VAW for the title of lowest expense ratio among broad U.S. materials ETFs, making it an excellent choice for compounding long-term returns.

Learn More

iShares Global Materials ETF (MXI)

Company Description: MXI is the largest ETF that provides global exposure to the materials sector, tracking the S&P Global 1200 Materials Sector Index. This diversifies the portfolio away from a purely U.S. focus.

Conservative Investing Strategy: Use MXI to introduce a geographical hedge to your materials allocation. By including companies from Europe, Japan, and other developed markets, you reduce reliance on the U.S. economic cycle alone.

Moderate Investing Strategy: Invest in MXI to play the global infrastructure boom, which often involves significant investment in countries outside the U.S. Its global reach helps capture this widespread demand.

Advanced Investing Strategy: Implement a global macro strategy. Overweight MXI when you anticipate a synchronized global economic expansion, as international materials companies often have higher cyclicality and more exposure to emerging market demand than their U.S. peers.

Traders Insight: Global funds introduce currency risk. Returns will be affected by fluctuations in the U.S. dollar against the currencies of the underlying international holdings.

Valuable Section: International Weighting: The fund offers significant weighting to European and Asia-Pacific companies, providing access to giants in chemicals, industrial gases, and mining whose performance is driven by non-U.S. industrial policy.

Learn More

SPDR S&P Global Natural Resources ETF (GNR)

Company Description: GNR tracks the S&P Global Natural Resources Index. It's a broad-based fund providing exposure not just to materials, but also to the Agriculture, Energy, and Metals & Mining sectors globally.

Conservative Investing Strategy: Use GNR as a single, diversified holding for a natural resources basket, simplifying exposure to commodity-producing sectors often used as an inflation hedge.

Moderate Investing Strategy: Allocate to GNR when you believe a long-term commodity bull market is beginning. Its balanced exposure to the three key resource sectors prevents overexposure to any single commodity's price volatility.

Advanced Investing Strategy: Employ a natural resource rotation model. Monitor the relative performance of the three sub-sectors (Agriculture, Energy, Mining). When one leg significantly underperforms, use GNR's diversified structure to potentially buffer the loss while still being positioned for the strength in the other legs.

Traders Insight: GNR is a 'producer-based' commodity play, meaning you're investing in the companies that extract and process the resources, not the physical commodities themselves. This can offer a dividend yield and less exposure to the costs of commodity futures contracts.

Valuable Section: Broad Natural Resources Mandate: GNR is a powerful tool for a single-click bet on tangible assets. It hedges against inflation and the devaluation of fiat currency by investing in the companies that own and produce the world's essential raw materials.

Learn More

SPDR S&P Metals & Mining ETF (XME)

Company Description: XME offers targeted exposure to the U.S. Metals & Mining sub-industry. Crucially, it uses an equal-weighting scheme, giving smaller mining companies the same influence as industry giants.

Conservative Investing Strategy: This is a niche, cyclical fund, generally too volatile for conservative investors. If used, it should be a small, highly tactical satellite holding within a much broader portfolio.

Moderate Investing Strategy: Invest in XME when you anticipate a surge in industrial or precious metal prices. The equal-weighting scheme gives powerful leverage to smaller, more speculative mining stocks that can explode higher during commodity booms.

Advanced Investing Strategy: Utilize the equal-weighting bias. When large-cap-weighted mining indexes (like a sub-section of XLB) appear overvalued, move to XME to position for superior returns from the historically faster-moving mid- and small-cap miners.

Traders Insight: The equal-weighting dramatically increases the fund's volatility compared to XLB. While potential gains are higher during a bull market, losses can be more severe in a downturn.

Valuable Section: Equal-Weight Volatility: By treating every company equally, XME is less sensitive to the performance of just one or two huge mining conglomerates and provides a purer, albeit more volatile, play on the overall health of the entire U.S. mining industry.

Learn More

Invesco DWA Basic Materials Momentum ETF (PYZ)

Company Description: PYZ is a "smart-beta" ETF that uses a quantitative model (Dorsey Wright Advisors) to select U.S. Basic Materials companies based on their relative strength (momentum) characteristics.

Conservative Investing Strategy: Avoid this fund. Its strategy is specifically designed for high turnover and momentum chasing, making it unsuitable for buy-and-hold or conservative capital preservation goals.

Moderate Investing Strategy: Use PYZ as a tactical overlay when the Materials sector is already outperforming the broader market. PYZ aims to ride the wave of the strongest-performing stocks, capturing short-to-medium term trends.

Advanced Investing Strategy: Employ a factor timing strategy. Buy PYZ only when your analysis indicates that the momentum factor is currently dominant in the market, allowing the quantitative strategy to leverage the sector's existing price strength.

Traders Insight: This fund has a higher expense ratio and higher turnover due to the active-like momentum screening. Its performance is entirely dependent on the persistence of price trends.

Valuable Section: Momentum-Driven Strategy: Unlike passive, market-cap-weighted funds, PYZ is designed to be pro-cyclical and actively seeks to profit from the "strong get stronger" phenomenon within the materials sector, not just sector exposure.

Learn More

iShares MSCI Global Metals & Mining Producers ETF (PICK)

Company Description: PICK offers global exposure to the Metals & Mining sub-industry (excluding gold and silver), tracking companies involved in the extraction and production of diversified metals, aluminum, and steel.

Conservative Investing Strategy: This fund is concentrated and cyclical; conservative investors should keep this to a small portion of their long-term holdings to gain exposure to industrial metals globally.

Moderate Investing Strategy: Invest in PICK when you anticipate high global industrial activity and infrastructure spending, driving up demand for base metals like copper, iron ore, and aluminum.

Advanced Investing Strategy: Utilize PICK to make a highly targeted bet on industrial metals inflation. Because it excludes gold and silver, it offers a "pure play" on the materials needed for manufacturing and construction, divorcing your bet from monetary precious metals.

Traders Insight: The exclusion of gold and silver makes this fund behave differently from broad mining or natural resource funds, offering a key advantage for traders with a specific base metal commodity outlook.

Valuable Section: Base Metal Focus: PICK is an excellent vehicle to bet on the electrification and decarbonization trend, as base metals are essential for electric vehicles, renewable energy infrastructure, and grid build-out.

Learn More

VanEck Steel ETF (SLX)

Company Description: SLX is a highly specialized ETF focused on global companies involved in the steel industry, including steel producers, miners of steel-making ingredients (like iron ore), and steel-related services.

Conservative Investing Strategy: Avoid. This fund is a highly concentrated, single-commodity play subject to extreme price volatility, global trade wars, and specialized supply/demand dynamics.

Moderate Investing Strategy: Use SLX for a high-conviction bet on a massive global infrastructure spending cycle. Steel is the backbone of all large construction and manufacturing projects.

Advanced Investing Strategy: Employ a global trade policy bet. Buy SLX when you expect tariffs or protectionist policies to benefit domestic steel producers, or when global demand from places like China is expected to surge dramatically.

Traders Insight: SLX is exceptionally sensitive to macroeconomic news regarding China's industrial output, U.S. infrastructure bills, and global trade duties, making it a powerful, though risky, tactical tool.

Valuable Section: Sector Purity: This ETF provides one of the purest ways to bet on the price of steel and its supply chain, which can offer superior returns if your thesis on global heavy industry is correct.

Learn More

VanEck Rare Earth and Strategic Metals ETF (REMX)

Company Description: REMX invests in companies globally involved in the mining, refining, and recycling of rare earth and strategic metals, such as lithium, cobalt, and various elements crucial for high-tech and military applications.

Conservative Investing Strategy: Avoid. This fund is highly specialized, concentrated, and subject to intense geopolitical risk (especially concerning China's dominance in the rare earth supply chain).

Moderate Investing Strategy: Invest in REMX to make a high-growth bet on the electric vehicle (EV) and battery storage revolution. Lithium, cobalt, and other strategic metals are core to this transition.

Advanced Investing Strategy: Utilize REMX to make a bet on national security and supply chain independence. As Western nations aim to decouple their strategic metal supply chains from dominant foreign producers, REMX can benefit from policy-driven investment in new domestic capacity.

Traders Insight: REMX is highly volatile and its performance is closely tied to the prices of a handful of specialized commodities (e.g., lithium). It often has a lower AUM, which can lead to lower liquidity.

Valuable Section: Future Technology Focus: This ETF offers a window into the materials of the future, positioning you to benefit from the global shift away from fossil fuels and into advanced computing, batteries, and permanent magnet technology.

Learn More

iShares MSCI Global Agriculture Producers ETF (VEGI)

Company Description: VEGI provides global exposure to companies involved in agriculture and farming, including producers of equipment, seeds, fertilizers, and agricultural chemicals (a key sub-sector of materials).

Conservative Investing Strategy: A small, long-term allocation can be used to capture the secular trend of global population growth and food security demand. This provides a materials-related hedge against food inflation.

Moderate Investing Strategy: Invest in VEGI when you anticipate periods of high food or soft commodity price inflation. The underlying companies can benefit from higher prices and increased demand for farm inputs.

Advanced Investing Strategy: Employ a commodity producer/consumer spread. Buy VEGI (long the producer) while shorting a consumer-staple stock (which faces higher input costs), to bet on the profitability of the agricultural supply chain.

Traders Insight: Performance is highly sensitive to weather events and crop cycles globally, making it unpredictable but reactive to breaking news regarding harvests or droughts.

Valuable Section: Food Security Hedge: As global food demand rises, VEGI offers exposure to the essential material inputs (like fertilizers and crop chemicals) needed to boost global agricultural yields, making it a critical thematic play.

Learn More

Disclaimer

The content provided on BearGoneBull is for educational and informational purposes only. It does not constitute financial, investment, or trading advice, and should not be interpreted as a recommendation to buy, sell, or hold any security.

All investment strategies and investments involve risk of loss. Past performance of any stock or strategy discussed is not indicative of future results. You should conduct your own research and consult with a licensed financial advisor before making any investment decisions.

BearGoneBull and its contributors are not registered investment advisors, brokers, or dealers. While we strive to provide accurate and timely information, we do not guarantee the completeness, reliability, or suitability of any content presented.

By using this site, you acknowledge that any investment decisions you make are entirely your own responsibility.

Material Sector ETFs

Materials Select Sector SPDR Fund (XLB)

Vanguard Materials ETF (VAW)

iShares U.S. Basic Materials ETF (IYM)

Fidelity MSCI Materials Index ETF (FMAT)

iShares Global Materials ETF (MXI)

SPDR S&P Global Natural Resources ETF (GNR)

SPDR S&P Metals & Mining ETF (XME)

Invesco DWA Basic Materials Momentum ETF (PYZ)

iShares MSCI Global Metals & Mining Producers ETF (PICK)

VanEck Steel ETF (SLX)

VanEck Rare Earth and Strategic Metals ETF (REMX)

iShares MSCI Global Agriculture Producers ETF (VEGI)

Disclaimer

This website uses cookies.