3 major semiconductor ETFs
The semiconductor industry has been one of the best performing industries in the market this year. In fact, semiconductor stocks have risen an average of 96% this year, and as of December 20, the industry’s average total return over the past 10 years has recorded 691%.
Semiconductors are essential in the digital age. Controls and manages the flow of electrical current in all types of electronics and technology, acting as a switch, conducting electricity, and powering smartphones, computers, gaming consoles, home appliances, medical equipment, and just about any other device you can think of. do. of.
As we enter the digital age where new applications such as artificial intelligence (AI) are constantly emerging, the utility of semiconductors is bound to increase further. A great way to invest in these high-performing industries without trying to pick the winners yourself is through an exchange-traded fund (ETF) that focuses solely on semiconductors. Here are three great options.
1. VanEck Semiconductor ETF
that much VanEck Semiconductor ETF (NASDAQ:SMH) is one of the most popular and best-performing semiconductor ETFs in which you can invest. It is highly concentrated, tracking the MVIS US-listed Semiconductor 25 index, meaning it only holds about 25 stocks. The fund includes mostly large-cap names as it seeks to track the most liquid companies in their industries based on market capitalization and trading volume.
The top three holdings are NVIDIA (NASDAQ:NVDA), which accounts for 19.2% of the portfolio, followed by Taiwan Semiconductor (NYSE:TSM), which accounts for 12.8%. The third largest position is Broadcom (NASDAQ:AVGO), representing 6.6% of the ETF.
The VanEck Semiconductor ETF is up 71% year to date and 68% over the past 12 months. It has recorded an average annual return of 24.5% over the past 10 years, and an average annual return of 23.5% since its founding in 2011. The ETF’s expense ratio is 0.35%.
that much iShares Semiconductor ETF (NASDAQ:SOXX) is one of the oldest ETFs, launched in 2001. It follows the ICE Semiconductor Index, which tracks the performance of the 30 largest semiconductor companies.
The iShares ETF includes companies that manufacture materials containing semiconductors, utilize LED and OLED technologies, or provide services or equipment related to semiconductors, such as packaging and testing. It utilizes a modified market capitalization weighting methodology that is essentially a mix of equal weighting and weighting by market capitalization. As a result, its top position is slightly less heavy than the VanEck fund.
The ETF’s top three holdings are Broadcom, which represents 8.8% of the portfolio, Advanced Micro Devices (NASDAQ:AMD), which represents 8.3%, and NVIDIA, which represents 7.6%. It’s slightly wider and less top-heavy than our first choice, but it’s still very focused.
Returns are also quite similar, as the iShares Semiconductor ETF is up 65% YTD and 61% over the past year. It has recorded an average annual return of 23.2% over the past 10 years, and an average of 10.2% since its launch in 2001. The iShares Semiconductor ETF has an expense ratio of 0.35%.
3. SPDR S&P Semiconductor ETF
The first two options are very similar, but SPDR S&P Semiconductor ETF (NYMARKET:XSD) is slightly different. It tracks the S&P Semiconductor Select Industry Index, which includes all semiconductor stocks within the S&P Total Market Index, so its range is significantly broader than other indices.
In other words, it holds a total of about 40 stocks, including large, medium, and small-cap semiconductor stocks. The SPDR ETF also differs in that it is weighted using a modified equal-weighting methodology. This offers a little more diversification than the other two.
So the top three holdings are different except for Broadcom, which is the largest holding at 3.1%. The next largest companies are First Solar (NASDAQ:FSLR) at 3%, followed by Lattice Semiconductor (NASDAQ:LSCC) and Allegro MicroSystems (NASDAQ:ALGM) both at 2.9%.
Year to date, the SPDR S&P Semiconductor ETF is up about 34.8%, with a one-year return of 32.5%. It has achieved an average annual return of 21.9% over the past 10 years, and has recorded an average annual return of 12.6% since its founding in January 2006. This fund’s expense ratio is 0.35%, the same as the other two funds.
Don’t forget to diversify
Keep in mind that these are highly concentrated industry-specific funds, so they will be more volatile and the underlying stocks will most likely move in tandem. These funds have aggressive growth potential, as this year’s numbers show, but volatility goes both ways, making them prone to large swings in the opposite direction.
But over the long term, they have generated market-beating returns. While any of these three ETFs can play an important role in a long-term investment strategy, they should not make up more than a relatively small portion of a diversified portfolio.
disclaimer: All investments involve risk. Under no circumstances should this article be taken as investment advice or constitute liability for investment profits or losses. The information in this report should not be relied upon for investment decisions. All investors should conduct their own due diligence and consult their own investment advisors when making trading decisions.
