The Fidelity MSCI Materials Index ETF (FMAT) seeks to track the MSCI USA IMI Materials Index, which measures the performance of U.S. companies involved in chemicals, construction materials, containers and packaging, metals and mining, and paper and forest products industries.
How It Works
FMAT uses a passively managed, market-capitalization-weighted approach that mirrors its benchmark index by holding materials sector stocks in proportion to their market value. The fund rebalances quarterly to maintain alignment with index changes and sector weight adjustments. As a sector-specific ETF, it concentrates investments exclusively in materials companies, typically holding 100-150 stocks ranging from large chemical manufacturers to smaller specialty materials firms.
Key Features
- Zero expense ratio provides cost-free exposure to materials sector, saving investors significant fees compared to actively managed alternatives
- Focused sector exposure allows targeted allocation to materials without broad market dilution from other industries
- 1.74% dividend yield reflects income potential from established materials companies with consistent cash flows
Risks
- This ETF can lose value when materials demand weakens during economic slowdowns, potentially declining 40-50% in severe recessions like 2008-2009
- Commodity price volatility directly impacts holdings, causing sharp swings when raw material costs fluctuate due to supply disruptions or demand changes
- Sector concentration risk means no diversification protection—all holdings move together during materials-specific downturns, amplifying losses compared to broad market ETFs
Who Should Own This
Best suited as a satellite holding (5-15% of equity allocation) for investors with medium-to-high risk tolerance seeking tactical materials sector exposure. Appropriate for 3-7 year time horizons during economic expansion phases or commodity supercycles. Works well for portfolio diversification or cyclical rotation strategies rather than core holdings.