Semiconductors are electrical components that are widely used across many different industries. Here we'll look at the best semiconductor ETFs.
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Introduction – Why Semiconductors?
Semiconductors are conductive electrical components used widely in things like computers, smartphones, appliances, and more. Investing in semiconductors is usually seen as a technology play in a very specific industry, but semiconductors are used in a wide variety of applications. Because of this broad application, the semiconductor industry as a whole can serve as an indicator of the health of the broader economy.
Heavy reliance on semiconductors results in fierce competition within the industry to make products smaller, faster, and cheaper. Think Intel, NVIDIA, and AMD, the application of which makes things like laptops and smartphones smaller and faster. Demand for semiconductors correlates closely with demand for these end consumer products.
Below we'll look at the best semiconductor ETFs.
The 3 Best Semiconductor ETFs
Below are the 3 semiconductor ETFs to access the industry.
SOXX – iShares PHLX Semiconductor ETF
The iShares PHLX Semiconductor ETF (SOXX) is the most popular ETF in this space, with over $3.5 billion in assets. The fund seeks to track the PHLX SOX Semiconductor Sector Index, providing diversified, market-cap-weighted exposure to US-listed semiconductor companies. The ETF does cap the weight of any individual holding at 8%, causing it to tilt to smaller companies. While this fund's holdings are listed in the United States, they don't have to be based there. SOXX is exposed for 5% to Taiwan, 3% to the Netherlands, and 92% to the U.S. This ETF has 30 holdings and an expense ratio of 0.46%.
SMH – VanEck Vectors Semiconductor ETF
Unlike SOXX above, the VanEck Vectors Semiconductor ETF (SMH) only holds large-cap semiconductor companies (25 of them), and doesn't cap its holdings. As such, SMH should be slightly less volatile than SOXX. SMH also achieves greater geographical diversification outside the United States, with 14% to Taiwan and 5% to the Netherlands. The fund seeks to track the MVIS U.S. Listed Semiconductor 25 Index and has an expense ratio of 0.35%.
XSD – SPDR S&P Semiconductor ETF
The SPDR S&P Semiconductor ETF (XSD) employs an equal weighting scheme to avoid concentrating in large semiconductor companies like Intel. Consequently, the fund tilts heavily to smaller companies and should be more volatile than the 2 ETFs above. Unlike the ETFs above, XSD only provides exposure to U.S. semiconductor companies. The fund seeks to track the S&P Semiconductor Select Industry Index and has an expense ratio of 0.35%.
Where To Buy These Semiconductor ETFs
All the above semiconductor ETFs are available at M1 Finance. The online broker has zero trade commissions and zero account fees, and offers fractional shares, dynamic rebalancing, intuitive pie visualization, and a sleek, user-friendly interface and mobile app. I wrote a comprehensive review of M1 Finance here.
Disclaimer: While I love diving into investing-related data and playing around with backtests, this is not financial advice, investing advice, or tax advice. The information on this website is for informational, educational, and entertainment purposes only. Investment products discussed (ETFs, mutual funds, etc.) are for illustrative purposes only. It is not a recommendation to buy, sell, or otherwise transact in any of the products mentioned. I always attempt to ensure the accuracy of information presented but that accuracy cannot be guaranteed. Do your own due diligence. I mention M1 Finance a lot around here. M1 does not provide investment advice, and this is not an offer or solicitation of an offer, or advice to buy or sell any security, and you are encouraged to consult your personal investment, legal, and tax advisors. All examples above are hypothetical, do not reflect any specific investments, are for informational purposes only, and should not be considered an offer to buy or sell any products. All investing involves risk, including the risk of losing the money you invest. Past performance does not guarantee future results. Opinions are my own and do not represent those of other parties mentioned. Read my lengthier disclaimer here.
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