Proprietary Data Insights Financial Pros’ Top Semiconductor ETF Searches in the Last Month
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Experts Reveal Their Top 5 Semiconductor ETFs |
AI is changing the face of the world. And it’s all being powered thanks to cutting-edge semiconductors and hardware. Companies like Nvidia (NVDA) have seen their stock skyrocket virtually unabated for months. Demand for AI and computing has lifted semiconductor stocks to new all-time highs. So, how are the financial pros playing this? Most are looking beyond individual stocks at semiconductor ETFs. While many in their top five searches are similar, iShares Philidelphia Semiconductor ETF (SOXX) came out on top not just this month but for most of the past year. We’re diving into this investment vehicle so you can decide whether it’s right for your portfolio. Key Facts About SOXX
The SOXX is a pretty straightforward ETF. It mimics the NYSE Semiconductor Index, which measures the performance of the 30 largest U.S.-listed semiconductor companies. This includes businesses primarily involved in designing, distributing, manufacturing, and selling semiconductors. The index includes mid- and large-cap stocks using a modified market-weighed approach. The modified market-weighted approach tends to cap the gains on larger companies, keeping them from dominating the index’s total weight. That’s why you see Nvidia as one of the largest holdings, though not much larger than Advanced Micro Devices, despite the large gap in market caps between those two companies. Performance The run in semiconductors isn’t a new phenomenon. As the performance chart shows below, the gains have accrued over the past decade. Notably, the gains in the last year are almost equal to those from three years ago. This speaks to the highly volatile nature of the semiconductor industry. Competition The top five semiconductor ETF searches by financial pros offered some interesting results. We found that modest changes in the investing structure yielded vastly different results over a 5-year period.
This chart illustrates a point we see so often – simpler is better. ETFs with more diversification tend to have lower returns than those that try to outsmart the market. ETFs with a straightforward, market-cap-weighted methodology often do better in the long-run. Our Opinion 9/10 While the SOXX is a great ETF, we prefer the SMH for its simplicity and pure market-cap-weighted approach. However, the SOXX provides plenty of liquidity, weekly options, and a slightly higher dividend yield. Plus, if you believe semiconductors due for a correction, then the slightly higher diversification may provide some extra cushion against a pullback. |
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