IYM – Should You Invest in the iShares U.S. Basic Materials ETF (IYM)?
Launched on 06/12/2000, the iShares U.S. Basic Materials ETF (IYM – Free Report) is a passively managed exchange traded fund designed to provide a broad exposure to the Materials – Broad segment of the equity market.
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.
Additionally, sector ETFs offer convenient 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 12, placing it in bottom 25%.
The fund is sponsored by Blackrock. It has amassed assets over $750.48 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 Russell 1000 Basic Materials RIC 22.5/45 Capped Gross Index measures the performance of the basic materials sector of the U.S. equity market.
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.
Annual operating expenses for this ETF are 0.39%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 2.20%.
Sector Exposure and Top Holdings
It is important to delve into an ETF’s holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Materials sector–about 92.50% of the portfolio.
Looking at individual holdings, Linde Plc (LIN – Free Report) accounts for about 20.91% of total assets, followed by Air Products And Chemicals Inc (APD – Free Report) and Freeport Mcmoran Inc (FCX – Free Report) .
The top 10 holdings account for about 65.26% of total assets under management.
Performance and Risk
Year-to-date, the iShares U.S. Basic Materials ETF has lost about -1.03% so far, and is down about -10.46% over the last 12 months (as of 05/29/2023). IYM has traded between $106.58 and $145.01 in this past 52-week period.
The ETF has a beta of 1.14 and standard deviation of 23.40% for the trailing three-year period, making it a high risk choice in the space. With about 43 holdings, it has more concentrated exposure than peers.
IShares U.S. Basic Materials ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, IYM is a sufficient option for those seeking exposure to the Materials ETFs area of the market. Investors might also want to consider some other ETF options in the space.
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 $5.29 billion in assets, FlexShares Morningstar Global Upstream Natural Resources ETF has $7.01 billion. XLB has an expense ratio of 0.10% and GUNR charges 0.46%.
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.