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Should You Invest in the iShares U.S. Basic Materials ETF (IYM)?

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

While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

Investor-friendly, sector ETFs provide many options 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%.

Index Details

The fund is sponsored by Blackrock. It has amassed assets over $892.67 million, making it one of the average sized ETFs attempting to match the performance of the Materials - Broad segment of the equity market. IYM seeks to match the performance of the Dow Jones U.S. Basic Materials Index before fees and expenses.

The Dow Jones U.S. Basic Materials Index measures the performance of the basic materials sector of the U.S. equity market.

Costs

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for this ETF are 0.41%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 1.29%.

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 18.35% of total assets, followed by Air Products And Chemicals Inc (APD) and Freeport Mcmoran Inc (FCX).

The top 10 holdings account for about 69.37% of total assets under management.

Performance and Risk

The ETF return is roughly 24.97% so far this year and it's up approximately 30.09% in the last one year (as of 11/10/2021). In that past 52-week period, it has traded between $104.99 and $141.25.

The ETF has a beta of 1.16 and standard deviation of 27.13% for the trailing three-year period, making it a high risk choice in the space. With about 40 holdings, it has more concentrated exposure than peers.

Alternatives

IShares U.S. Basic 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, IYM 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.

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 $6.18 billion in assets, Materials Select Sector SPDR ETF has $8.50 billion. GUNR has an expense ratio of 0.46% and XLB charges 0.12%.

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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iShares U.S. Basic Materials ETF (IYM): ETF Research Reports
 
Air Products and Chemicals, Inc. (APD): Free Stock Analysis Report
 
FreeportMcMoRan Inc. (FCX): 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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