Designed to provide broad exposure to the Technology ETFs category of the market, the iShares Semiconductor ETF (SOXX) is a smart beta exchange traded fund launched on 07/10/2001.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
SOXX is managed by Blackrock, and this fund has amassed over $8.96 billion, which makes it one of the largest ETFs in the Technology ETFs. This particular fund seeks to match the performance of the PHLX SOX Semiconductor Sector Index before fees and expenses.
The ICE Semiconductor Index measures the performance of U.S. traded securities of companies engaged in the semiconductor business.
Cost & Other Expenses
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Operating expenses on an annual basis are 0.35% for SOXX, making it one of the least expensive products in the space.
The fund has a 12-month trailing dividend yield of 0.90%.
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.
Representing 100% of the portfolio, the fund has heaviest allocation to the Information Technology sector.
Taking into account individual holdings, Nvidia Corp (NVDA) accounts for about 8.94% of the fund's total assets, followed by Broadcom Inc (AVGO) and Texas Instrument Inc (TXN).
SOXX's top 10 holdings account for about 58.53% of its total assets under management.
Performance and Risk
Year-to-date, the iShares Semiconductor ETF has gained about 47.70% so far, and it's up approximately 37.74% over the last 12 months (as of 06/16/2023). SOXX has traded between $298.68 and $516.50 in this past 52-week period.
SOXX has a beta of 1.32 and standard deviation of 34.59% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 35 holdings, it has more concentrated exposure than peers.
Alternatives
IShares Semiconductor ETF is a reasonable option for investors seeking to outperform the Technology ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
SPDR S&P Semiconductor ETF (XSD) tracks S&P Semiconductor Select Industry Index and the VanEck Semiconductor ETF (SMH) tracks MVIS US Listed Semiconductor 25 Index. SPDR S&P Semiconductor ETF has $1.57 billion in assets, VanEck Semiconductor ETF has $9.63 billion. XSD has an expense ratio of 0.35% and SMH charges 0.35%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Technology ETFs.
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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Texas Instruments Incorporated (TXN) : Free Stock Analysis Report
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
Broadcom Inc. (AVGO) : Free Stock Analysis Report
VanEck Semiconductor ETF (SMH): ETF Research Reports
SPDR S&P Semiconductor ETF (XSD): ETF Research Reports
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