VAW vs XME

VAWBVanguard Materials ETF

XMEBState Street SPDR S&P Metals & Mining ETF

In short

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.

XME Not the chemicals-heavy materials fund. XME holds roughly 40 miners and steelmakers on a modified equal weight, so a small copper name carries about the weight of a giant. Ore, coal and metal, since 2006.

Stated mandate

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.

XME The fund seeks to track, before fees and expenses, the total return performance of the S&P Metals and Mining Select Industry Index.

Why people hold it

• 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.

• XME Pure play on the metals and mining slice: aluminum, coal, copper, gold, precious metals, silver and steel sub-industries, not the whole materials sector.ssga.com
• Modified equal weighting spreads exposure across large, mid and small caps, so the biggest miners don't set the tone for the whole portfolio.ssga.com
• One of the more actively traded funds in its corner of the market, and a multi-billion-dollar fund that has been running since 2006.
• 0.35% expense ratio, slightly under the median for the materials funds we grade, which is unusual for a narrow industry sleeve.

Worth knowing

• 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.

• XME Broad materials funds cost far less: XLB at 0.08% and VAW at 0.09%. They also own a very different mix, chemicals and packaging included.
• About 40 names, many of them smaller miners, in one cyclical industry. Swings run wider than a diversified sector fund's.
• The portfolio's fortunes track commodity cycles in steel, coal, copper and gold rather than broad industrial demand.ssga.com

Full VAW profile⁠

Full XME profile⁠