Should You Invest in the VanEck Semiconductor ETF (SMH)?
Sector ETF report for SMH
Looking for broad exposure to the Technology - Semiconductors segment of the equity market? You should consider 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.
Additionally, sector ETFs offer convenient 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 7, placing it in top 44%.
The fund is sponsored by Van Eck. It has amassed assets over $7.19 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.
The MVIS US Listed Semiconductor 25 Index tracks the overall performance of companies involved in semiconductor production and equipment.
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 0.50%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, 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 14.16% of total assets, followed by Nvidia Corp (NVDA) and Asml Holding Nv (ASML).
The top 10 holdings account for about 63.64% of total assets under management.
Performance and Risk
So far this year, SMH has gained about 37.96%, and is up roughly 54.03% in the last one year (as of 11/09/2021). During this past 52-week period, the fund has traded between $188.82 and $301.94.
The ETF has a beta of 1.16 and standard deviation of 34.61% 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.
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 an outstanding 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 $1.44 billion in assets, iShares Semiconductor ETF has $8.97 billion. XSD has an expense ratio of 0.35% and SOXX charges 0.43%.
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
NVIDIA Corporation (NVDA): Free Stock Analysis Report
ASML Holding N.V. (ASML): 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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