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Should You Invest in the VanEck Semiconductor ETF (SMH)?

If you're interested in broad exposure to the Technology - Semiconductors segment of the equity market, look no further than the VanEck Semiconductor ETF (SMH), a passively managed exchange traded fund launched on 12/20/2011.

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.

Sector ETFs are also funds of convenience, offering many ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Technology - Semiconductors is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 9, placing it in bottom 44%.

Index Details

The fund is sponsored by Van Eck. It has amassed assets over $6.13 billion, making it one of the largest ETFs attempting to match the performance of the Technology - Semiconductors segment of the equity market. SMH seeks to match the performance of the MVIS US Listed Semiconductor 25 Index before fees and expenses.

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The MVIS US Listed Semiconductor 25 Index tracks the overall performance of companies involved in semiconductor production and equipment.

Costs

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for this ETF are 0.35%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 0.78%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

Looking at individual holdings, Taiwan Semiconductor Manufacturing Co L (TSM) accounts for about 11.51% of total assets, followed by Nvidia Corp (NVDA) and Texas Instruments Inc (TXN).

The top 10 holdings account for about 59.73% of total assets under management.

Performance and Risk

The ETF has lost about -35.87% so far this year and is down about -22.85% in the last one year (as of 09/21/2022). In that past 52-week period, it has traded between $195.99 and $316.56.

The ETF has a beta of 1.29 and standard deviation of 37.92% for the trailing three-year period, making it a high risk choice in the space. With about 26 holdings, it has more concentrated exposure than peers.

Alternatives

VanEck Semiconductor ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, SMH is a great option for investors seeking exposure to the Technology ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

SPDR S&P Semiconductor ETF (XSD) tracks S&P Semiconductor Select Industry Index and the iShares Semiconductor ETF (SOXX) tracks PHLX SOX Semiconductor Sector Index. SPDR S&P Semiconductor ETF has $1.05 billion in assets, iShares Semiconductor ETF has $6.02 billion. XSD has an expense ratio of 0.35% and SOXX charges 0.40%.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.


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VanEck Semiconductor ETF (SMH): ETF Research Reports
 
Texas Instruments Incorporated (TXN) : Free Stock Analysis Report
 
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
 
Taiwan Semiconductor Manufacturing Company Ltd. (TSM) : Free Stock Analysis Report
 
iShares Semiconductor ETF (SOXX): ETF Research Reports
 
SPDR S&P Semiconductor ETF (XSD): ETF Research Reports
 
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Zacks Investment Research