ETF Sector: Materials A materials ETF is an exchange-traded fund that invests in companies involved in the production of materials used in manufacturing and construction. The materials sector includes a wide range of industries, such as chemicals, mining, and paper & packaging. Because materials are a key input in many industries, the sector tends to be volatile. When economic activity is strong, demand for materials increases, driving up stock prices. However, during economic downturns, materials demand declines and stock prices usually fall as well. For investors looking for exposure to the materials sector without the volatility of individual stocks, materials ETFs can be a good option. Materials ETFs offer diversified exposure to the sector and can help reduce overall portfolio risk.