The Vanguard Materials Index Fund ETF (VAW) and the Fidelity MSCI Materials Index ETF (FMAT) are two of the largest materials sector ETFs and two of the most popular among individual investors. Many investors compare VAW vs FMAT because they are so similar, although differences are difficult to find.
A quick reminder that this site does NOT provide investment recommendations. Fund comparisons (such as this one) are not conducted to identify the “best” fund (since that will vary from investor to investor based on investor-specific factors). Rather, these fund comparison posts are designed to identify and distinguish between the fund details that matter versus the ones that don’t.
The Short Answer
VAW and FMAT track the same index and there is no material difference between the funds. They are identical and interchangeable in my opinion.
The Longer Answer
Historical Performance: VAW vs FMAT
VAW was launched back in 2004, while FMAT was launched on October 21, 2013. Since then, the two funds have performed identically, with an annualized difference of only .01%! The cumulative performance differential over that timeframe has only been about .13% too! From a performance perspective, VAW and FMAT are identical and interchangeable.
Portfolio Exposures: VAW vs FMAT
Both VAW and FMAT track the same index, the MSCI US Investable Market Materials 25/50 Index. Consequently, the two funds have identical geographic, market-cap, and industry exposures.
Geographic Exposure
Both VAW and FMAT hold essentially 100% stocks, so I will not dig into country exposures or market classification here. For all intents and purposes, the two funds have identical geographic exposures.
Market Cap Exposure
As mentioned above, both funds track the same index and have materially identical market cap exposures.
Sector Exposure
VAW and FMAT are materials ETFs and so their holdings are 100% materials stocks.
Practical Factors: VAW vs FMAT
Transaction Costs
As ETFs, both FMAT and VAW are free to trade on many platforms. Bid-ask spreads for both VAW and FMAT are extremely low and volume is sufficient to prevent most individual investors from “moving the market.”
Expenses
FMAT has a lower expense ratio at .08%, compared to VAW’s .10%. Although VAW is 25% more expensive, we’re talking about 2 basis points. At these low levels of expense ratios, the difference doesn’t matter.
Tax Efficiency & Capital Gain Distributions
Neither VAW nor FMAT has ever made a capital gains distribution and I do not expect them to make any moving forward. In my opinion, these two funds are equally tax-efficient.
From a tax-loss harvesting perspective, investors may want to avoid using these two funds as substitutes for one another since they could be considered “substantially identical” (given that they track the same index and are identical in many ways).
Bottom Line: VAW vs FMAT
VAW and FMAT are identical in nearly every way. I would not spend any time comparing them or trying to decide which is better.
