FXZ vs VAW

FXZDFirst Trust Materials AlphaDEX Fund

VAWBVanguard Materials ETF

In short

FXZ Most materials ETFs hand you the sector exactly as the market weights it. FXZ re-sorts it: the AlphaDEX rules rank Russell 1000 materials stocks on growth and value measures, then hold roughly 40 of them. Same sector, different shopping list.

VAW Vanguard's materials aisle in one ticker: chemicals, packaging and metals, roughly 120 names deep, for 0.09% a year while the category norm sits several times higher.

Stated mandate

FXZ The fund seeks to track the performance of the StrataQuant® Materials Index, an equity index that applies the AlphaDEX® methodology to selected Russell 1000® materials-sector stocks.

VAW The fund seeks to track a materials-sector equity benchmark through passive indexing and normally invests at least 80% of assets in the benchmark's stocks.

Why people hold it

• FXZ Not a cap-weighted sector wrapper. The AlphaDEX screen ranks Russell 1000 materials names on growth and value measures and keeps roughly 40, so weight follows the screen rather than company size.ftportfolios.com
• In a sector where a handful of chemical and industrial-gas giants dominate cap-weighted funds, the rules push meaningful weight toward smaller and mid-sized materials companies.ftportfolios.com
• Running since 2007, which gives the methodology a long public track record across full commodity and rate cycles instead of a few years of backtest.

• VAW Charges 0.09% a year, several times below the median for broad materials funds. Cheap enough that cost stops being the argument.
• Holds about 120 stocks from MSCI's US Investable Market materials index, so it reaches down the cap ladder instead of stopping at the biggest names.
• Plain passive indexing, at least 80% in benchmark stocks, and it has tracked that benchmark closely. One of the stronger builds in the materials group.
• Trading since 2004 and now a multi-billion-dollar fund, run by Vanguard's index desk. Distributions arrive quarterly.

Worth knowing

• FXZ Cost is the trade-off: 0.64% a year, one of the pricier options in the materials group, where the big cap-weighted funds (XLB, VAW, FMAT) charge single-digit basis points.
• A screened portfolio of roughly 40 names can behave quite differently from the plain materials sector in either direction. It tracks the StrataQuant Materials Index, not the sector everyone quotes.
• Trading is moderate rather than heavy, so spreads and order size matter more here than with the most heavily traded funds in the category. Distributions come quarterly.

• VAW One sector, and a cyclical one. Chemicals, miners and packagers ride construction and industrial demand, so swings run wider than a total-market fund.
• Moderately traded rather than a volume monster, so spreads can widen in fast markets.
• XLB and FMAT sit a basis point lower at 0.08%. A rounding error, but it exists.

Full FXZ profile⁠

Full VAW profile⁠