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

Looking for broad exposure to the Materials - Broad segment of the equity market? You should consider the iShares U.S. Basic Materials ETF (IYM), 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.

Sector ETFs also provide investors access to a broad group of companies in particular sectors that offer low risk and diversified exposure. 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 Blackrock. It has amassed assets over $480.56 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.

Costs

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 0.39%, making it one of the cheaper products in the space.

It has a 12-month trailing dividend yield of 1.67%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into 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 heaviest allocation in the Materials sector--about 92.20% of the portfolio.

Looking at individual holdings, Linde Plc (LIN) accounts for about 22.87% of total assets, followed by Air Products And Chemicals Inc (APD) and Ecolab Inc (ECL).

The top 10 holdings account for about 66.68% of total assets under management.

Performance and Risk

The ETF return is roughly 0.31% and is down about -8.51% so far this year and in the past one year (as of 05/08/2025), respectively. IYM has traded between $116.16 and $153.25 during this last 52-week period.

The ETF has a beta of 1.07 and standard deviation of 20.77% 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 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.

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 $4.59 billion in assets, Materials Select Sector SPDR ETF has $4.83 billion. GUNR has an expense ratio of 0.46% and XLB charges 0.08%.

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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This article originally published on Zacks Investment Research (zacks.com).

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