🤝 BFF Take
VAW Has Better Coverage — XLB Is the Liquid Option for Tactical Traders
XLB (Materials Select Sector SPDR) and VAW (Vanguard Materials ETF) both target the US materials sector — chemicals, mining, metals, packaging, and construction materials. XLB holds 28 S&P 500 materials companies — Linde, Sherwin-Williams, Freeport-McMoRan, Air Products, and Nucor are typical top holdings. VAW holds 115+ materials companies adding mid-cap specialty chemical companies, smaller miners, and packaging companies not in the S&P 500. Both charge essentially nothing: XLB 0.09%, VAW 0.10%. Materials are a highly cyclical sector closely tied to commodity prices, construction activity, and global economic growth. XLB is the more liquid vehicle with higher trading volume; VAW's broader index provides better diversification within the sector.
📋 Quick Takeaways
⛏️XLB holds 28 S&P 500 materials companies; VAW holds 115+ — more mid-cap chemicals, miners, packaging
💰XLB 0.09% vs VAW 0.10% — same fee; both are among the most affordable sector ETFs on the market
📊Materials are cyclical — tied to commodity prices, construction, and global economic growth cycles
📊 Data-Based Take: VAW has the lower fee
Whether the lower-cost fund suits your situation depends on your existing holdings, account type, tax situation, and how you use each fund. This is a cost comparison, not a personalized recommendation.
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Reviewed by a CFA® Charterholder · Data updated Jun 2026 · Educational only, not financial advice
XLB
Materials Select Sector SPDR Fund
VAW
Vanguard Materials ETF
📋 XLB vs VAW — Key Facts Side by Side
| Metric |
XLB |
VAW |
| Fund Name |
Materials Select Sector SPDR Fund |
Vanguard Materials ETF |
| Issuer |
State Street |
Vanguard |
| Tracks Index |
Materials Select Sector Index |
MSCI US IMI Materials 25/50 |
| Expense Ratio |
0.09% ✓ |
0.10% |
| Cost per $10K/yr |
$9.00 |
$10.00 |
| AUM |
$4B |
$2B |
| Holdings |
28 |
115 |
| Inception |
1998 |
2004 |
| 1-Year Return |
+6.80% |
+7.40% |
| 3-Year Return |
+4.20% |
+4.80% |
| 5-Year Return |
+12.40% |
+13.20% |
| Avg Bid-Ask Spread |
0.01% |
0.02% |
Data from ETF BFF database. Returns are annualised. Not investment advice.
📊 XLB vs VAW — Annualised Returns
Annualised returns (trailing, price-based). Past performance does not guarantee future results.
🎯 Should You Buy XLB or VAW?
Choose if...
XLB
- You want the lowest fees — saves ~$1/yr per $10K vs VAW
- You already use State Street and prefer staying within their fund family
Choose if...
VAW
- You want broader diversification (115 holdings vs 28)
- You already use Vanguard and prefer staying within their fund family
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❓ XLB vs VAW — Frequently Asked Questions
What companies are in XLB and VAW?
Both funds hold major US materials companies including: Linde (industrial gases), Sherwin-Williams (coatings), Air Products (industrial gases), Freeport-McMoRan (copper mining), Newmont (gold mining), Nucor (steel), Celanese and Dow (chemicals), and Packaging Corporation of America. VAW adds mid-cap specialty chemical companies, smaller mining stocks, and building materials companies not in XLB's S&P 500 universe.
How do materials ETFs perform vs the S&P 500?
Materials are a cyclical sector that has historically underperformed the S&P 500 over long periods but can dramatically outperform in commodity supercycles (2003-2008, 2021-2022). The sector benefits from infrastructure spending, clean energy minerals demand (copper, lithium, rare earths), and inflationary environments where commodity prices rise. In deflationary or slow-growth environments, materials lag significantly.
Does the clean energy transition affect materials ETFs?
Yes — the energy transition requires massive amounts of copper (EV wiring, solar panels, wind turbines), lithium and nickel (batteries), cobalt, and rare earth minerals. This "green metals" demand is a structural tailwind for mining companies. Companies like Freeport-McMoRan (copper) and Newmont (gold/copper) benefit directly. Not all materials companies benefit equally — chemical companies with different commodity exposure may not share the green metals tailwind.
Are materials a good inflation hedge?
Materials companies can be partial inflation hedges because their products are commodities that often rise in price with inflation. However, materials companies also have significant input costs (energy, labor) that also rise with inflation, compressing margins. The relationship between inflation and materials stock performance is complex — commodity producers with low input costs tend to benefit most from inflation; downstream chemical companies with high input costs benefit less.
What is the materials sector vs energy sector difference?
Energy (XLE, VDE) covers oil/gas/fossil fuel companies. Materials (XLB, VAW) covers mining, chemicals, metals, paper/packaging, and construction materials. Both are commodity-linked and cyclical, but they respond to different commodity price cycles. Energy is oil/gas-driven; materials respond to industrial metals (copper, steel), chemicals, and specialty materials. Many investors hold both for full commodity/real assets sector exposure.
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ℹ️ Data shown is for educational purposes and may not reflect the most current figures. Returns are trailing price-based and exclude dividend reinvestment. Past performance does not guarantee future results. ETF BFF is not a licensed financial advisor — this is not personalized financial advice.