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Is SPDR S&P Semiconductor ETF (XSD) a Strong ETF Right Now?
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Designed to provide broad exposure to the Technology ETFs category of the market, the SPDR S&P Semiconductor ETF (XSD - Free Report) is a smart beta exchange traded fund launched on 01/31/2006.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
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.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
The fund is managed by State Street Global Advisors, and has been able to amass over $1.52 billion, which makes it one of the larger ETFs in the Technology ETFs. This particular fund seeks to match the performance of the S&P Semiconductor Select Industry Index before fees and expenses.
The S&P Semiconductor Select Industry Index represents the Semiconductor sub-industry portion of the S&P Total Markets Index. The S&P TMI tracks all the U.S. common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Small Cap exchanges. The Semiconductor Index is a modified equal weight index.
Cost & Other Expenses
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 XSD are 0.35%, which makes it one of the least expensive products in the space.
The fund has a 12-month trailing dividend yield of 0.37%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
XSD's heaviest allocation is in the Information Technology sector, which is about 100% of the portfolio.
Taking into account individual holdings, Semtech Corp (SMTC - Free Report) accounts for about 3.42% of the fund's total assets, followed by Allegro Microsystems Inc (ALGM - Free Report) and Wolfspeed Inc (WOLF - Free Report) .
The top 10 holdings account for about 31.02% of total assets under management.
Performance and Risk
The ETF has gained about 24.70% so far this year and it's up approximately 8.71% in the last one year (as of 08/16/2023). In the past 52-week period, it has traded between $143.14 and $231.97.
The fund has a beta of 1.39 and standard deviation of 36.84% for the trailing three-year period, which makes XSD a high risk choice in this particular space. With about 39 holdings, it has more concentrated exposure than peers.
Alternatives
SPDR S&P Semiconductor ETF is an excellent option for investors seeking to outperform the Technology ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
IShares Semiconductor ETF (SOXX - Free Report) tracks PHLX SOX Semiconductor Sector Index and the VanEck Semiconductor ETF (SMH - Free Report) tracks MVIS US Listed Semiconductor 25 Index. IShares Semiconductor ETF has $8.89 billion in assets, VanEck Semiconductor ETF has $9.81 billion. SOXX 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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Is SPDR S&P Semiconductor ETF (XSD) a Strong ETF Right Now?
Designed to provide broad exposure to the Technology ETFs category of the market, the SPDR S&P Semiconductor ETF (XSD - Free Report) is a smart beta exchange traded fund launched on 01/31/2006.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
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.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
The fund is managed by State Street Global Advisors, and has been able to amass over $1.52 billion, which makes it one of the larger ETFs in the Technology ETFs. This particular fund seeks to match the performance of the S&P Semiconductor Select Industry Index before fees and expenses.
The S&P Semiconductor Select Industry Index represents the Semiconductor sub-industry portion of the S&P Total Markets Index. The S&P TMI tracks all the U.S. common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Small Cap exchanges. The Semiconductor Index is a modified equal weight index.
Cost & Other Expenses
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 XSD are 0.35%, which makes it one of the least expensive products in the space.
The fund has a 12-month trailing dividend yield of 0.37%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
XSD's heaviest allocation is in the Information Technology sector, which is about 100% of the portfolio.
Taking into account individual holdings, Semtech Corp (SMTC - Free Report) accounts for about 3.42% of the fund's total assets, followed by Allegro Microsystems Inc (ALGM - Free Report) and Wolfspeed Inc (WOLF - Free Report) .
The top 10 holdings account for about 31.02% of total assets under management.
Performance and Risk
The ETF has gained about 24.70% so far this year and it's up approximately 8.71% in the last one year (as of 08/16/2023). In the past 52-week period, it has traded between $143.14 and $231.97.
The fund has a beta of 1.39 and standard deviation of 36.84% for the trailing three-year period, which makes XSD a high risk choice in this particular space. With about 39 holdings, it has more concentrated exposure than peers.
Alternatives
SPDR S&P Semiconductor ETF is an excellent option for investors seeking to outperform the Technology ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
IShares Semiconductor ETF (SOXX - Free Report) tracks PHLX SOX Semiconductor Sector Index and the VanEck Semiconductor ETF (SMH - Free Report) tracks MVIS US Listed Semiconductor 25 Index. IShares Semiconductor ETF has $8.89 billion in assets, VanEck Semiconductor ETF has $9.81 billion. SOXX 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.